• 2012年股东年会
  • 上午场
    • 1. 欢迎辞
    • 2. 喜诗糖果棒棒糖集体照
    • 3. 第一季度财报
    • 4. 介绍伯克希尔董事
    • 5. 问答环节开始
    • 6. 巴菲特：我的继任者也将是”首席风险官”
    • 7. 我们在保险业务中”保守计提准备金”
    • 8. “我们的影响力之小令人惊讶”
    • 9. 伯克希尔股价高估时不会发出警告
    • 10. 我们会在伯克希尔股票”显著”低估时买入
    • 11. 美国银行比欧洲银行状况好得多
    • 12. 芒格：用天然气替代煤炭是”愚蠢的”
    • 13. GEICO没有计划使用驾驶员追踪技术
    • 14. 商学院在进步，但仍教授”胡说八道”
    • 15. 巴菲特规则：对”非常非常高的收入者”征收最低税
    • 17. 没有补贴，风能就不会“划算”
    • 18. 政治观点不应影响投资决策
    • 19. 潜在交易的规模受限于不使用股票的承诺
    • 20. 我们无法把工作带回美国，因为它们从未离开
    • 21. 巴菲特：前列腺癌治疗是“小事一桩”
    • 22. 只要价格合适，我们会接手年金责任
    • 23. 巴菲特会做什么不同的事
    • 24. 当“市场先生”像“精神错乱的醉汉”时，要利用机会
    • 25. 我们忽略头条新闻和宏观因素
    • 26. 伯克希尔的大型子公司在过去五年“表现良好”
    • 27. 衍生品“不会成为伯克希尔的重大因素”
    • 28. 不同公司采用不同的估值方法
    • 29. 巴菲特对黄金的负面看法“激起情绪”
    • 30. 巴菲特：“我最好的想法都在伯克希尔”
    • 31. 为什么BNSF是国民保险公司的子公司？
    • 32. 我们不希望伯克希尔的股票太高或太低
• 2012年年度股东大会
  • 第三部分/第六部分
    • 33. 巴菲特看到了本地报纸的价值
    • 34. 巴菲特：亚马逊不会影响 Nebraska Furniture Mart
    • 35. “几乎不可能”复制伯克希尔
    • 36. 很少试图改变我们股票投资组合中的公司
    • 37. 好的商业保险公司很难找到
    • 38. 更灵活的回购门槛？
    • 39. 沃尔玛的墨西哥贿赂丑闻不会造成永久性损害
    • 40. 巴菲特关于对冲基金的赌注最新进展
  • 下午会议
    • 1. 通用再保险在”重大整修行动”后正在改善
    • 2. 巴菲特之后伯克希尔文化面临的威胁
    • 3. 巴菲特接受现金消耗型业务 12% 的回报率
    • 7. 伯克希尔“不仅仅是一家投资公司”
    • 7. Berkshire is “not just an investment company”
    • 8. 伟大的中国公司
    • 8. Great Chinese companies
    • 9. 不会投资苹果或谷歌，但也不会做空它们
    • 9. Won’t invest in Apple or Google, but wouldn’t bet against them
    • 10. 强大的货运铁路经济学将克服政治因素
    • 10. Strong freight railroad economics will overcome politics
    • 11. 第四站没有问题
    • 11. No question from station 4
    • 12. 比较伯克希尔与标普指数
    • 12. Comparing Berkshire to the S&P
    • 13. 我们甚至不尝试协调我们的子公司
    • 13. We don’t even try to coordinate our subsidiaries
    • 14. 收购林产品公司可能性不大
    • 14. Acquisition of a forest products company unlikely
    • 15. 没有计算风险的魔法公式
    • 15. No magic formula for calculating risk
    • 16. 瑞士再保险合同到期是“非事件”
    • 16. Swiss Re contract expiration is “nonevent”
    • 17. 房利美和房地美“偏离轨道”后的住房问题
    • 17. Housing problems after Fannie and Freddie “left the tracks”
    • 22. 温和的GDP增长随时间推移会产生“惊人”的累积效应
    • 22. Modest GDP growth creates “staggering” increases over time
    • 23. 巴菲特不会向超级政治行动委员会捐款
    • 23. Buffett won’t contribute to super PACs
    • 24. 别担心伯克希尔的短期股价波动
    • 24. Don’t worry about Berkshire’s short-term stock moves
    • 25. 伯克希尔为何没有派发股息
    • 25. Why Berkshire hasn’t paid a dividend
    • 26. “学习，再学习，不断学习”
    • 26. “Learning and learning and learning”
    • 27. 从别人的愚蠢中学习
    • 27. Learning from the follies of others
    • 28. 我们不构建强大的进入壁垒，我们购买它们
    • 28. We don’t build strong barriers to entries, we buy them
    • 29. 芒格谈比亚迪和中国电动汽车
    • 29. Munger on China’s BYD and electric cars
    • 30. 伯克希尔的保险浮存金和低利率
    • 30. Berkshire’s insurance float and low interest rates
    • 31. 芒格：能源独立是“愚蠢的想法”
    • 31. Munger: Energy independence is a “stupid idea”
    • 35. 正式业务会议开始
    • 36. 选举董事
    • 37. 关于制定书面CEO继任计划政策的股东提案
    • 38. 正式会议休会

WARREN BUFFETT: Good morning. I’m Warren, and this hyperkinetic fellow is Charlie. And we’re going to conduct this pretty much as we have in the past. We’ll take your questions, alternating among the media and analysts in the audience until 3:30, with a break around noon for an hour. And then we’ll have the regular meeting of the shareholders beginning at that time. Feel free to drift away and shop in the other room. We have a lot of things for you there.

WARREN BUFFETT: We only have one scripted part of this meeting, and See’s Candy has placed on all of the seats a little packet. And what we’d like you to do, we’re going to like — we’d like to videotape everyone eating their pop at the same time for posting on Facebook and for use by the media in today’s meeting. So, if each of you will open up the lollipop now. Now, first of all, you’ve got them open. We’d like you to hold them up above your head. We’re going to get a shot of 18,000. Dennis, here we come. And we’ll get a few shots of that. We got it all, Mele? OK. And now you can take off the cover and the good part comes, and Charlie and I have — we have fudge up here and we have peanut brittle. And I said the meeting would run until 3:30. If we’ve consumed 10,000 calories each, we sometimes have to stop a little early at that point. (Laughter)

WARREN BUFFETT: The only slide we have at this point is we did put out our earnings — first quarter earnings — yesterday. And in general, all of our companies are — with the exception of the ones in the residential construction business, which was the case last year and it’s the case this year — that all of the companies, except those in that area, pretty much have shown good earnings. And in the case of the bigger ones, the five largest non-reinsurance companies earned — all had record earnings last year, aggregating of those five companies something over 9 billion pretax. And in the annual report I said I thought they would — if business didn’t take a nosedive this year — that they would earn over $10 billion pretax this year. And certainly nothing we’ve seen so far would cause me to backtrack on that prediction.

The insurance — if you read our 10-Q and turn to the insurance section, you will see that there was an accounting change mandated for all property-casualty insurance companies, which — rather technical and I won’t get into the details of it — it changed something that’s called the deferred policy acquisition cost, called DPAC. It has no effect on the operations at all, on the cash, but it did change the earnings downward by about $250 million pretax for GEICO in the first quarter. It’s based on whether you defer some advertising. It has — GEICO had a terrific first quarter, had a real profit margin of almost 9 percentage points, and the float grew, and everything good happened at GEICO in the first quarter. We had good growth. But we did make that accounting change. That accounting change also affects, to a lesser degree, the second quarter, and it may even trail just a bit into the third. But the underlying figures are somewhat better than the figures that we’ve presented there. And so, overall, we feel good about the first quarter. We feel good about the year.

WARREN BUFFETT: Maybe we should — even though we’ll do it again at the meeting — but we should probably introduce the directors. And I don’t know whether the audience can see the people here but if you can turn up the lights or something so they can. We’ll start off, of course, with Charlie, Charlie Munger. And then alphabetically — if the directors would just — (Applause) I was going to suggest that you withhold your applause until the end, but I know he’s sort of irresistible, so we’ll make an excuse for him. (Laughter) For the remainder of the directors, if they stand and remain standing, and then you can applaud them at the end, if you will. We’ve got Howard Buffett, Stephen Burke, Susan Decker, Bill Gates, David Gottesman, Charlotte Guyman, Don Keough, Tom Murphy, Ron Olson, and Walter Scott, Jr. Now you can go wild. (Applause)

WARREN BUFFETT: Now we’ll start with the questions. And what we will do is we’ll start over here with the media —with one of them — move to one of the analysts, and then move to one of the shareholders, and we’ll go by stations with the shareholders. And if we get — sometimes we’ve had as many as 60 or 62 questions. If we get to 54, at which point each person on the panel here has had a shot at 6 questions, then from that point on we’ll do nothing but the — but from the shareholders from 54 on. So we’ll see how that goes.

WARREN BUFFETT: And with that, we’ll start off with Carol Loomis of Fortune Magazine.

CAROL LOOMIS: Good morning. I’ll make my mini speech, which the most important point is that neither Warren nor Charlie have an idea of what we’re going to ask. The other thing is that we received hundreds, if not thousands, of questions. We don’t know the exact count, so we certainly couldn’t use every one. If we didn’t use yours, we’re sorry. So for the first question, Warren, two shareholders wrote me about the heavy responsibilities that will fall on your successor and his or her ability to deal with them. So I’ll make this a twopart question. From Chris Inge (PH), “Mr. Buffett, you have stated that you believe the CEO of any large financial organization must be the chief risk officer as well. “So, at Berkshire, does the leading CEO candidate for successor, as well as the backup candidates, possess the necessary knowledge, experience, and temperament to be the Chief Risk Officer?” The related question is about the Goldman Sachs, GE, and Bank of America deals, all giving Berkshire warrants, that you have negotiated.

Shareholder Jacques Cartier — Catere (PH), excuse me — asked whether these specific transactions could have been done with similar terms without your involvement. If not, what implications would that have for Berkshire’s future returns?

WARREN BUFFETT: Yeah. The — I do believe that the CEO of any large, particularly financialrelated, company should — it really should apply beyond that, but certainly with a financiallyrelated company — should be the chief risk officer. It’s not something to be delegated. In fact, Charlie and I have seen that function delegated at very major institutions, and the risk committee would come in and report every week, every month, and they’d report to the directors, and they’d have a lot of nice figures lined up, and be able to talk in terms of how many sigmas were involved and everything, and the place was just ripe for real trouble. So I do — I am the chief risk officer at Berkshire. It’s up to me to understand anything that could really hit us in any catastrophic way. My successor will have the same responsibility, and we would not select anybody for that job that we did not think had that ability. It’s a very important ability. It ranks right up there with allocation of capital and selection of managers for the operating units. It’s not an impossible job.

I mean, it — the basic risks could involve excessive leverage and they — and then the — they could involve excessive insurance risk. Now, we have people in charge of our insurance businesses that themselves worry very much about the risk of their own unit and, therefore, the person at the top really has to understand whether those three or four people running the big insurance units are correctly assessing their risks, and then also has to be able to aggregate and think how they accumulate over the units. That’s where the real risk is, unless you’re engaging in a lot of leverage in your financial structure, which isn’t going to happen. Before I answer the second, Charlie, would you like to comment on that?

CHARLIE MUNGER: Well, not only was it — this risk decision frequently delegated in America, but it was delegated to people who were using a very silly way of judging risk that they’ve been taught in some our leading business schools. (Laughter) So this is a very serious problem this man is raising. The so-called “Value at Risk” and the theories that outcomes in financial markets followed a Gaussian curve, invariably. It was one of the dumbest ideas ever put forward. (Laughter)

WARREN BUFFETT: He’s not kidding, either. We’ve seen it in action. And the interesting thing is we’ve seen it in action with people that know better, that have very high IQs, that study lots of mathematics. But it’s so much easier to work with that curve, because everybody knows the properties of that curve, and can make calculations to eight decimal places using that curve. But the only problem is that curve is not applicable to behavior in markets, and people find that out periodically. The second question: we’re well equipped, Carol, to answer that question. We would not have anybody — we’re not going to have an arts major in charge of Berkshire. (Laughter) The question about negotiated deal, there’s no question that partly through age, partly through the fact we’ve accumulated a lot of capital, partly the fact that I know a lot more people than I used to know, and partly because Berkshire can act with speed and finality that is really quite rare among large American corporations, we do get a chance, occasionally, to make large transactions. But that takes a willing party on the other side.

When we got in touch with Brian Moynihan at the Bank of America last year, I had dreamt up a deal which I thought made sense for us, and I thought it made sense for the Bank of America, under the circumstances that existed. But I’d never talked to Brian Moynihan before in my life. I had no real connection with the Bank of America. But when I talked to him, he knew that we meant what we said, so that if I said we would do 5 billion and — I laid out the terms of the warrants — and I said we’d do it. And he knew that that was good and that we had the money. And that ability to commit, and have the other person know your commitment is good for very large sums and, maybe, complicated instruments, is a big plus. Berkshire will possess that subsequent to my departure. I don’t think that every deal that I made would necessarily be makeable by a successor, but they’ll bring other talents as well. I mean, I can tell you the successor that the board has agreed on can do a lot of things much, much better that I can do.

So, if you give up a little on negotiated financial deals, you may gain a great deal, just in terms of somebody that’s more energetic about going out and making transactions. And those deals have not been key to Berkshire. If you look at what we did with General Electric and Goldman Sachs, for example in those two deals in 2008, I mean, they were OK, but they are not remotely as important as, you know, maybe buying Coca-Cola stock, which was done in the market over a period of six or eight months. We bought IBM over a period of six or eight months last year in the market. We bought all these businesses on a negotiated basis. So the values in Berkshire that have been accumulated by some special security transaction are really just peanuts compared to the values that have been created by buying businesses like GEICO or ISCAR or BNSF, and the sort. It’s not a key to Berkshire’s future, but the ingredients that allowed us to do that will still be available and, to some extent, peculiar to Berkshire, in terms of sizable deals.

If somebody gets a call from most people and they say, you know, we’ll give you $10 billion tomorrow morning, and we’ll have the lawyers work on it overnight, and here are the terms and there won’t be any surprises, they’re inclined to believe it’s a prank call or something of the sort. But with Berkshire, they believe it can get done. Charlie?

CHARLIE MUNGER: Yeah, and in addition, a lot of the Berkshire directors are terrific at risk analysis. Think of the Kiewit Company succeeding, as it has over decades, in bid construction work on oil well platforms and tunnels and remote places and so on. That’s not easy to do. Most people fail at that eventually, and Walter Scott has presided over that bit of risk control all his life and very routinely. And Sandy Gottesman created one of my favorite risk control examples. One day he fired an associate, and the man said, “How can you be firing me when I’m such an important producer?” And Sandy said, “Yes,” he says. “But I’m a rich old man and you make me nervous.” (Laughter)

WARREN BUFFETT: Yeah. We do not have anybody around Berkshire that makes us nervous.

WARREN BUFFETT: Starting off with the Swiss Re example, we wrote a very, very large contract of reinsurance with Swiss Re — I would say, I don’t know, a year-and-a-half ago now, or thereabouts — and it applied to their business written, I think, in 2004 and earlier. And they had a lot of business. It was American business. And we started seeing — we got reports quarterly — and we started seeing mortality figures coming in quarterly that were considerably above our expectations and what looked like should be the case — should have been the case — looking at their earlier figures. So at the end of last year — we have a stop-loss arrangement on this — so we set up a reserve that really reserves it to the worst case, except we present-value that. But until we get — until we figure out what can be done about that contract — and we have some possibilities in that respect — we will keep that reserved at this worst case. And so we took a charge for that amount.

We do — we are reinsuring Swiss Re, and then they are reinsuring a bunch of American life insurers, and there is ability to reprice that business as we go along, but the degree to which we and Swiss Re might want to reprice that may be a subject of controversy, we’ll see, so we just decided to put it up on a worst-case basis. Getting to the question of how GEICO reserves, how Gen Re reserves, I would say that — it’s described to some extent in our annual report — but I would say that the one overriding principle is that we hope, and our plan is, to reserve conservatively. I mean, it’s a lot different reserving in the auto business, where on short-tail lines and physical damage and property damage, you know, you find out very quickly how you’re doing. And if you look at GEICO’s figures, you know, we’ve had redundancies year after year after year. Gen Re was under reserved at the time we bought it, and back in those 1999/1998 years, those developed very badly. Now they’ve been developing very favorably for some time.

I think with Tad Montross, we’ve got a fellow that — where I feel very good about the way he reserves. But he is not — there’s no coordination between him and Tony [Nicely] at GEICO, nor with Ajit [Jain] at Berkshire Hathaway Reinsurance. They all have, I think, the same mindset, but they don’t — they’re three very different, different businesses. Charlie?

CHARLIE MUNGER: There’s always going to be some contract where the results are worse than we expected. Why would anybody buy our insurance if that weren’t the case? (Scattered laughter)

WARREN BUFFETT: It’s interesting how — I mean, just take 9/11. You know, it’s very hard to reserve after something like 9/11, because to what extent is business interruption insurance — when you close the stock exchange for a few days, are you going to be able to collect on insurance? And, you know, when you close restaurants at airports, you know, 2,000 miles away, because the airport is closed for a few days, is that business interruption insurance? There’s — a lot of questions come up. We turned out to be somewhat over-reserved for 9/11, as it turned out. You’ve got the same situation going on in both Thailand and Japan because, as you know, the supply chain for many American companies was interrupted by the tsunami in Japan and the floods in Thailand. And if you’re a car manufacturer in the United States and you aren’t getting the parts, you know, does your business interruption insurance cover the fact that there were floods for your supplier in Thailand or the tsunami hit in Japan? Sometimes that stuff takes years and years to work out.

On balance, I think you will find that our reserves generally develop favorably.

WARREN BUFFETT: Well, Charlie has made the most recent investment in China, so I’ll let him handle that one.

CHARLIE MUNGER: Yeah, we’re not spending much time giving advice to China. (Laughter)

WARREN BUFFETT: That’s not because they’re not hungry for our advice. (Laughs)

CHARLIE MUNGER: If you stop to think about it, China has been doing very, very well from a very tough start. To some extent, we ought to seek advice there instead of give it.

WARREN BUFFETT: We have — I would say that we’ve found it almost useless in 60 years of investing to give advice to anybody in business.

CHARLIE MUNGER: We have found that we have a lot of control — it’s kind of like controlling affairs by pushing on a noodle. It’s amazing how little influence we’ve had when we had 20 percent of the stock. And people have this illusion of mass control at headquarters. The beauty of Berkshire is that we created a system that doesn’t require much control at headquarters.

WARREN BUFFETT: But we — if you look at our four largest investments, which are worth, we’ll say — they’re certainly worth $50 billion today. We’ve had some of them for 25 years — one of them — and another one for 20 years. The number of times that we have talked — unless we were on the board, which I was at CocaCola — but the number of times we’ve talked to the CEO of those companies, where we have $50 billion, I would say doesn’t average more than twice a year, and we are not in the business of giving them advice. If we thought that the success of our investment depended upon them following our advice, we’d go onto something else. (Laughter)

WARREN BUFFETT: Yeah, we’ve written in the back of the report how we prefer to — not to see our shares sell at the highest possible price. I mean, we’ve got a whole different view on that than many managers. If we could have our way, we would have the stock trade once a year, and Charlie and I would try to come up with a fair value for intrinsic business value, and it would trade at that. That’s incidentally what some private companies do, but you’re not allowed that luxury in the public market, and public markets do very strange things. If Charlie and I think Berkshire is overvalued, then it would be a very interesting proposition to have us announce, you know, a half an hour before the market opens someday, and have us both saying, gee, we think your stock is overpriced. I mean, we would have to do that with every shareholder simultaneously, and they would — who knows how they would react. We have never — I don’t think — certainly never consciously done anything to encourage people to buy our stock at a price we thought was above intrinsic value.

The one time we sold stock, under some pressure back in the mid-1990s when somebody was going to do something with the stock that we thought would be injurious to people, we created a stock and we thought the stock was a little on the high side then and we put on the cover of the prospectus something that I don’t think has ever been seen, which we said that neither Charlie nor I would buy the stock at the price, nor would we recommend that our family did it. (Scattered laughter) And if you want a collector’s item for a proxy material — offering material — get that because I don’t think you’ll see that one again. We think that if we are going to repurchase shares from people, that we ought to let them know what — that we think we’re buying it too cheap. I mean, we wouldn’t buy out — if we had two or three partners and somebody wanted to sell out — but we’d probably try to arrive at a fair price — but if it was established by a market and they were going to sell too cheap, we’d tell them we thought they were selling it too cheap.

We are not selling it. We are not saying that 111 percent — we’re using 110 percent of book — 111 percent or 112 percent is intrinsic business value — we know it’s significantly above 110. And I don’t think we will ever announce — because I don’t see how we would do it — I don’t think we’ll ever announce that we think the stock is selling considerably above intrinsic business value, but we will certainly do nothing to indicate that we think the stock is attractively priced, if that comes about. Charlie?

CHARLIE MUNGER: I’ve got nothing to add. (Laughter)

WARREN BUFFETT: The 1.1 is a figure that we feel very comfortable with. So, we would probably feel comfortable with a figure somewhat higher than that, but we wanted to be dramatically — or very significantly — undervalued to do buybacks, and we want to be very sure that every shareholder that sells to us knows that we think that it’s dramatically — or significantly — undervalued when we do it. But we have a terrific group of businesses. The marketable securities that we own, we think, are going to be worth more in the future, but we carry them at what they’re selling for today. So they’re not — that’s not an undervalued item, you know, in the balance sheet. But some of the businesses we own are worth far more money than we carry them, and we have no significant business that’s worth any significant discount from the carrying value. So we would — from strictly a money-making viewpoint — we would love to buy billions and billions and billions of dollars’ worth of stock at — we’ll move that up to tens of billions — at 110 percent of book.

You know, I don’t think it will happen, but it could happen. You never know what kind of a market you’ll run into. And if we get the chance to do it, as long as we don’t take our cash position below 20 billion, we will — we would buy very aggressively at that price. We know we’re making significant money for remaining shareholders. The value per share goes up when we buy at 110 percent of book, and therefore — and it’s so obvious to us that we would do it on a big scale if given the chance to, and if it did not take our cash position down below a level that leaves us comfortable. Charlie?

CHARLIE MUNGER: Well, some people buy their own stock back regardless of price. That’s not our system.

WARREN BUFFETT: Well, we think it’s — we think a lot of the share repurchases are idiotic.

CHARLIE MUNGER: I was trying to say that more gently.

WARREN BUFFETT: You’ve never done it before. (Laughter) The — it’s — I mean, it’s for ego. I’ve been in a lot of board rooms where share repurchase authorizations have been voted, and I will guarantee you it’s not because the CEO is thinking the way we think at all. They like buying their stock better at higher prices, and they like issuing options at lower prices. You know, it’s just exactly the opposite than the way we would think. We will only do it for one reason, and that’s to increase the per-share value the day after we’ve done it. And if we get a chance to do that, we both, you know, in a big way, we’ll do it in a big way. I don’t — strictly operating as a financial guy, I would hope we get a chance to do a lot of it. Operating as a fiduciary for hundreds of thousands of people, I don’t want to see them sell —

CHARLIE MUNGER: We hope the opportunity never comes.

WARREN BUFFETT: Yeah. But if it does, we’ll grab it.

WARREN BUFFETT: Well, I have a decidedly different view on European banks than American banks. The American banks are in a far, far, far better position than they were three or four years ago. They’ve taken most of the abnormal losses that existed, or that were going to manifest themselves, in their portfolios from what’s now 3 1/2 or four years ago. They’ve buttressed their capital in a very big way. They’ve got liquidity coming out their ears at the bigger banks. The American banking system is in fine shape. The European banking system was gasping for air a few months back, which is why Mr. Draghi opened up his wallet at the ECB and came up with roughly a trillion euros of liquidity for those banks. Now a trillion euros is about $1.3 trillion, and $1.3 trillion is about one-sixth of all the bank deposits in the United States. I mean, it was a huge act by the European Central Bank, and it was designed to replace funding that was running off from European banks. European banks had more wholesale funding than American banks, on average.

If you look at the Bank of America or Wells Fargo, they get an enormous amount of money from a natural customer base. European banks tended to get much more of it on a wholesale basis, and that money can run pretty fast. So the European banks need more capital in many cases. They’ve done very little along that line. One Italian bank had a rights offering here three or four months ago, but basically they have not wanted to raise capital, probably because they didn’t like the prices at which they would have had to do so, and they were losing their funding base. The problem on the funding base has been solved by the ECB because the ECB gave them this money for three years at 1 percent. I’d like to have a lot of money at three years at 1 percent, but I’m not in trouble, so I can’t get it. (Laughter) But I just — if you look at our banking system, it’s really remarkable what’s been accomplished.

I thought at the time that the Treasury and the Fed were maybe a little overdoing it when they brought those bankers to Washington and banged their heads together and said you’re going to take this money whether you like it or not. But overall, I think that policy was very sound for this country’s economy. And if some banks were forced to raise capital that they didn’t need, you know, which I might not have liked as a shareholder at one of them, overall, I think that our society benefited enormously. And I think the Fed and the Treasury has handled things quite sensibly during a period when if they hadn’t handled this sensibly, that our world today would be a lot different. Charlie?

CHARLIE MUNGER: Yeah. Europe has a lot of problems we don’t. We’ve got this full federal union, and the country that runs the central bank can print its own money and pay off its own debt and so on. And in Europe, they don’t have a full federal union and that makes it very, very difficult to handle these stresses. So we’re more comfortable with the risk profile in the United States.

WARREN BUFFETT: It’s night and day. I mean, it — in the fall of 2008, when essentially Bernanke and Paulson, and implicitly, the President of the United States, said we’ll do whatever it takes, you knew that they had the power, and the will, to do whatever it took. But when you get 17 countries that have surrendered their sovereignty, as far as their currency is concerned, you know, you have this problem. Henry Kissinger said it a long time ago. He said, “If I want to call Europe, what number do I dial?” You know, and when you have 17 countries and — just imagine if we’d had 17 states in 2008, and we had to have the governors of those states all go to Washington and agree on a course of action when money market funds were — there was a panic in there, the panic in commercial paper, you name it — we would have had a different outcome. So I would put European banks and American banks in two very different categories.

WARREN BUFFETT: Yeah. Well, MidAmerican will never really benefit or be penalized too much by the price of coal, because if coal is cheap, the benefit is going to be passed on to customers, and if it’s expensive, the costs are going to be passed on. You know, MidAmerican really is a — it’s a regulated public utility. It has several — we have two MidAmericans. We have a MidAmerican Holding and a MidAmerican that operates in Iowa, then we have utilities on the West Coast. But those utilities are pass-through organizations. They need to be operated efficiently in order to achieve their rate of return, but if they are operated efficiently and in the public interest, whether coal or labor, whatever it is, may go up or down, really doesn’t affect them, although it affects their customers. Coal traffic is important to all railroads in the United States, and coal traffic is down this year. This may interest you. This year, in the first quarter, kilowatt hours used in the United States went down 4 percent — 4.7 percent.

That is a remarkable decrease in electricity usage, 4.7 percent, and that affected, of course, the demand for coal. But the other thing that’s happening, as you mentioned, natural gas got down under $2 — it’s a little higher now — but it got down under $2 at the same time oil was $100. And if you told Charlie or me five years ago that you’d have a 50-to-1 ratio between oil and natural gas, I think we would have asked you what you were drinking. Did you ever think that was possible, Charlie?

CHARLIE MUNGER: No. And I think what’s happening now is, to use your word, it’s idiotic. We are using up a precious resource, which we need to create fertilizer and so forth, and sparing a resource which is precious but not as precious, which is thermal coal. If I were running the United States, I would use up every ounce of thermal coal before I’d touch a drop of natural gas. But that’s — conventional view is exactly the opposite. I think those natural gas reserves we just found are the most precious things we could leave our descendants. I’m in no hurry to use it up, and the gas is worth more than the coal.

WARREN BUFFETT: Despite the wild things we’ve seen in pricing, particularly this ratio of natural gas prices to oil, you can’t change — I mean the installed base is so huge when you get into electricity generation — that you can’t really change the percentages too much, although there has been a shift in recent months. Where gas generation is feasible, it has supplanted some coal generation. And certainly in the future, you’re going to see a diminution in the percentage of electricity generated from coal in this country. But it won’t be dramatic because it can’t be dramatic. You just can’t — the megawatts involved are just too huge to have some wholesale change. It’s going to be very interesting to see how this whole gas-oil ratio plays out, because it has changed everyone’s thinking, and it’s changed in a very short period of time. I mean, three years ago, people wouldn’t have said this was possible.

CHARLIE MUNGER: Yeah. The conventional wisdom of the economics professors is if it happens in a free market it must be OK. It will work out best in the end. That is not my view with 100 percent accuracy. I think there are exceptions to that idea. And I think it’s crazy to use up natural gas at these prices.

WARREN BUFFETT: Yeah. Progressive, as you know, has probably been the leader in what you just described. And we have not done that at GEICO, but it — if we think there becomes a superior way to evaluate the likelihood of anybody having an accident, you know, I think we have 50 — I think you have to answer 51 questions — which is more than I would like, if you go to our website to get a quote. And every one of those is designed to evaluate your propensity to get in an accident. Obviously, if you could you could ride around in a car with somebody for six months, you might learn quite a bit about the propensity, particularly if they didn’t know you were there, you know, like with your 16-year-old son. But I do not see that as being a major change, but if it becomes something that gives you better predictive value about the propensity of any given individual to have an accident, we will take it on, you know, and we will try to get rid of the things that don’t really tell us that much all the time.

But we’re always looking for more things that will tell us if we look around at these — the people in this room, one by one, you know — what tells us their likelihood of having an accident in the next year. We know that youth is, for example. I mean, there is no question that a 16-year-old male is much more likely to have an accident than some guy like me that drives 3500 miles a year and is not trying to impress a girl when he does it, you know. (Laughter) So, you know, that one is pretty obvious. Some of these others — some things are very good predictors that you wouldn’t necessarily expect to be. Credit scores are, but — and they’re not allowed in all places — but they will tell you a lot about driving habits. We’ll keep looking at anything, but I do not see any — I don’t see in this new experiment — anything that threatens GEICO in any way. GEICO, in the first quarter of the year — now the first quarter is our best quarter — but we added a very significant number of policies.

I forget what the exact number was, but February turns out to be the best month for some reason. We were up there getting pretty close to 300,000 policies. So our marketing is working extremely well, and our risk selection is working extremely well, and our retention is working well. So GEICO is quite a machine. That’s one of the — that’s the business that we carry, as I’ve mentioned in the past — I think we carry it at a billion dollars — roughly a billion dollars over its tangible book value. You know, it’s worth a whole lot more than that. I mean, based on the price we paid, that figure would come up these days to, you know, certainly something more like $15 billion more than carrying value. And we wouldn’t sell it there. We wouldn’t sell it at all, but that would not tempt us in the least. Charlie?

CHARLIE MUNGER: Nothing to add.

WARREN BUFFETT: Well, I wouldn’t — I don’t know. Charlie, I wouldn’t blame business schools particularly for most of the ills — would you? I think they’ve taught to students a lot of nonsense about investments, but I don’t think that’s been the cause of great societal problems. What do you think?

CHARLIE MUNGER: No, but it was a considerable sin. (Laughter)

WARREN BUFFETT: Well, you want to elaborate on what was the more sin —

CHARLIE MUNGER: No, no. I think business school education is improving. (Laughter)

WARREN BUFFETT: Is the implication from a low base or —

CHARLIE MUNGER: Yes. (Laughter)

WARREN BUFFETT: I’d agree with that. (Laughter) No, in investing, I would say that probably the silliest stuff that we’ve seen taught at major business schools probably has been — maybe it’s because it’s the area that we operate in — but has been in the investment area. I mean, it is astounding to me how the schools have focused on sort of one fad after another in finance theory, and it’s usually been very mathematically based. When it’s become very popular, it’s almost impossible to resist if you’re — if you hope to make progress in faculty advancement. Going against the revealed wisdom of your elders can be very dangerous to your career path at major business schools. And you know, really, investing is not that complicated. I would have — you know, a couple of the courses. I would have a course on how to value a business, and I would have a course on how to think about markets. And I think if people grasped the basic principles in those two courses that they would be far better off than if they were exposed to a lot of things like modern portfolio theory or option pricing.

Who needs option pricing to be in an investment business? You know, when people — you know, when Ray Kroc started McDonald’s, I mean, he was not thinking about the option value of what the McDonald’s stock might be or something. He was thinking about whether people would buy hamburgers, you know, and what would cause them to come in, and how to make those fries different than other people’s, and that sort of thing. It’s totally drifted away — the teaching of investments. I look at the books that are used, sometimes, and there’s really nothing in there about valuing businesses, and that’s what investing is all about. If you buy businesses for less than they’re worth, you’re going to make money. And if you know the difference between the businesses that you can value and the ones that you can’t value, you know, which is key, you’re going to make money. But they’ve tried to make it a lot more difficult and, of course, that’s what the high priests in any particular arena do.

They have to convince the laity that the priests have to be listened to. Charlie?

CHARLIE MUNGER: The folly creeps into the accounting, too. A very long-term option on a big business you understand — the stock of a big business that you understand — or even a stock market index — should not be — the optimal way to price it is not by using Black Scholes, and yet the accounting profession does that. They want some kind of a standardized solution that requires them not to think too hard, and they have one. (Laughter)

WARREN BUFFETT: Is there anybody we’ve forgotten to offend? (Laughter) If you’ll send a note up. (Laughs)

AUDIENCE MEMBER: Yes. John Horton, Water Street Capital, Jacksonville, Florida. Since Berkshire will likely need to offer a stock component for very large acquisitions like Burlington Northern, wouldn’t Berkshire lower its cash outlay by increasing the price of its stock to near fair value, perhaps by offering a 2 to 3 percent dividend or a promised percentage of cash earnings? Might this have the effect of actually lowering the cash outlay needed for such acquisitions? As 30-year shareholders with almost $1 billion of exposure, we like this approach. Thank you.

WARREN BUFFETT: Yeah. We would obviously prefer to have our stock sell at exactly intrinsic business value, even though we don’t know that precise figure, but Charlie and I would have a range that would not differ too widely. And if it’s over intrinsic business value, and we could use it as part of a consideration for buying something else at intrinsic business value, and then use cash for the balance, you know, we would like that situation. And that — that’s very likely to occur in the future. It’s occurred in the past. Berkshire, without paying a dividend, has sold, probably, at or above intrinsic value as much of the time in the last 35 or so years as it has below. I mean, it will bob around. And I do not think a dividend would be a plus, in terms of having it sell at intrinsic value most of the time. I think it might be just the opposite. I mean, here we are, we’re willing to pay, you know, 110 cents on the dollar for what’s in there.

So the idea of paying out money, which we think is worth at least 110 cents on the dollar within the place, and have it turn into 100 cents on the dollar when paid out, just is not very attractive to us, unless we find we can’t do things in the future that make sense. But our goal — and we put it in the annual report. Our goal is to have the stock sell at as close to intrinsic business value as it can. But with markets — you know, the way markets operate, most of the time it will be bobbing up or down from that level. And we’ve seen that now for 40-plus years, and we’ve tried to, at least in a way, point out what we think is going on. And if it ever — if it — and it will. I mean, when it trades at intrinsic business value or higher, there may be times when we will use it. We’d still prefer using cash, though. Cash is our favorite medium of purchase just because we’re going to generate a lot of it. And we hate giving out shares.

We do not like the idea of trading away part of See’s Candies or GEICO or ISCAR or BNSF. The idea of leaving you with a lower percentage interest in those companies because of any acquisition ambitions of ours is anathema to us. Charlie?

CHARLIE MUNGER: Well, what he suggested is a very conventional approach, and we think it’s better for the shareholders to do it the way we’re doing it. (Applause)

WARREN BUFFETT: I should point out, I’m in the position — giving away all of my stock between now and 10 years after my death when my estate is settled — but I’m giving it away every year. You know, it will do more good, in terms of its philanthropic consequences, if it’s at a higher price than lower price. I mean, there’s nobody here that has more of an interest in the stock selling at what I’ll call a fair value, as opposed to a discount value, than I do. I know I’m not a seller, but I’m disposing of the stock, and I would rather have it buy, you know, X quantity of vaccines than 80 percent of X. So it isn’t like we’ve got some great desire to have the stock sell cheap. If it does sell cheap, we’ll, you know, we’ll buy it in, but our interest is really in having it sell at, more or less, the fair value.

And we think if we perform reasonably well, in terms of running the business, and if we tell the truth about the business, and explain to a selected group of shareholders who are interested in that aspect of investing, that over time, it will average that. And that’s happened over the years, but it doesn’t happen every year. If people get excited enough about internet stocks, they’re going to forget about Berkshire. When they get disillusioned with internet stocks then — I’m going back 10 or 12 years on that. But there have been times when people have gotten very excited about Berkshire, and there have been times when they’ve gotten very depressed. Charlie, anything?

WARREN BUFFETT: OK. Carol.

CAROL LOOMIS: This question comes from Kevin Getnowski (PH) of Yutan, Nebraska. And to it, I’ve added one question at the end, which came from another shareholder writing about the same subject. “You’ve described the newspaper business in the past as chopping down trees, buying expensive printing presses, and having a fleet of delivery trucks, all to get pieces of paper to people to read about what happened yesterday. “You constantly mention the importance of future intrinsic value in evaluating a business or company. With all of the new options available in today’s social media and the speculation of the demise of the newspaper media, why buy the Omaha World-Herald?” “Was there some” — this is a question from the other one — “Was there some self-indulgence in this?”

WARREN BUFFETT: No, I would say this about newspapers. It’s really fascinating, because everything she read is true, and it’s even worse than that. (Laughter) The newspapers have three problems, two of which are very difficult to overcome, and one, if they don’t — the third — if they don’t overcome it, they’re going to have even worse problems, but maybe can be overcome. Newspapers — you know, news is what you don’t know that you want to know. I mean, everybody in this room has a whole bunch of things that they want to keep informed on. And if you go back 50 years, the newspaper contained dozens and dozens and dozens of areas of interest to people where it was the primary source. If you wanted to rent an apartment, you could learn more about renting apartments by looking at a newspaper than going anyplace else. If you wanted a job, you could learn more about that job. If you wanted to know where bananas were selling the cheapest this weekend, you could find it out.

If you wanted to know how — whether Stan Musial, you know, went two for four, or three for four, last night, you went to the newspapers. If you wanted to look at what your stocks were selling at, you went to the newspapers. Now, all of those things, which are of interest to many, many people, have now found other means — they’ve found other venues — where that information is available on a more timely, often cost-free, basis. So newspapers have to be primary about something of interest to a significant percentage of the people that live within their distribution area. And the — there were so many areas where they were primary 30 or 40 years ago that you could buy a newspaper and only use a small portion of it and it still was valuable to you. But now you don’t use a newspaper to look for stock prices. You get them instantly off the computer. You don’t look for the newspapers for apartments to rent, in many cases, or jobs to find, or the price of bananas, or what happened in the NFL yesterday. So they’ve lost primacy in all of these areas that were important. They still are primary in a great many areas.

The World-Herald tells me, every day, a lot of things that I want to know that I can’t find someplace else. They don’t tell me as many things as they did 20 or 30 or 40 years ago that I want to know, but they still tell me some things that I can’t find out elsewhere. Most of those items — overwhelmingly — those items are going to be local. You know, they’re not going to tell me a lot about Afghanistan or something of the sort that I want to know but I don’t know. I’m going to get that through other medium. But they do tell me a lot of things about my city, about local sports, about my neighbors, about a lot of things that I want to know. And as long as they stay primary in that arena, they’ve got an item of interest to me. Now, the problem they have, they are expensive to distribute, as the questioner mentioned. And then the second problem is that, throughout this country, we had 1700 daily newspapers. We have about 1400 now.

The — in a great many cases, they are going up on the web and giving free the same thing that they’re charging for in delivery. Now, I don’t know of any business plan that has sustained itself for a long time, maybe you can think of — maybe Charlie can think of one — but that has charged significantly in one version and offers the same version free to people, that had a business model that would work over time. And lately, in the last year even, many newspapers have experimented with, and to some extent succeeded, in those experiments, in getting paid for what they were giving away on the net that otherwise they were trying to charge for in terms of delivery. I think there is a future for newspapers that exist in an area where there’s a sense of community, where people actually care about their schools, and they care about what’s going on in the given geographic area. I think there’s a market for that. It’s not as bullet proof, at all, as the old method when you had 50 different reasons to subscribe to the newspaper.

But I think if you’re in a community where most people have a sense of community, and you don’t give away the product, and you cover that local area in telling people about things that are of concern to them, and doing that better than other people, whether it be high school sports, you know. I’ve always used the example of obituaries. I mean, people still get their obituaries from the newspaper. It’s very hard to go to the internet and get obituaries. But I’m interested in Omaha and knowing who’s getting married, or dying, or having children, or getting divorced, or whatever it may be. When I lived in White Plains, New York, I really wasn’t that interested in it. I did not feel a sense of community there. So we have bought — and we own a paper in Buffalo where there’s a strong sense of community, and we make reasonable money in Buffalo. It’s declined, and we have to have a internet presence there where people have to pay to come on. We have to develop that.

But I think that the economics, based on the prices we paid — and we may buy more newspapers — I think the economics will work out OK. It’s nothing like the old days, but it still fulfills an important function. It’s not going to come back and tell you what your — and tell you on Wednesday what stock prices closed at on Tuesday and have you rush to the paper to find out. It’s not going to tell you what happened in basketball last night when you’ve gone to ESPN.com and found out about it. But it will tell you a whole lot about what’s going on, if you’re interested in your local institutions. And we own papers in towns where people have strong local interest. Charlie?

CHARLIE MUNGER: Well, we had a similar situation years ago when World Book’s encyclopedia business was about 80 percent destroyed by Bill Gates. (Laughter) He gave away a free computer with every bit of software.

WARREN BUFFETT: He charged $5, I think, Charlie —

CHARLIE MUNGER: And well, whatever it was. But we are still selling encyclopedias and we still make a reasonable profit but not nearly as much as we used to.

WARREN BUFFETT: Right.

CHARLIE MUNGER: Some of these newspapers, we hope, will be the same kind of investments. They’re not going to be our great lollapaloozas.

WARREN BUFFETT: The prices were — well, we actually may be doing more in newspapers, and we will be going where there’s a strong sense of community. But if you live in Grand Island, Nebraska, where we have a paper, or North Platte, and your children live there and your parents probably live there, your church is there, you are going to be quite interested in a lot of things that are going on in North Platte, and in the state of Nebraska, that you won’t find readily on television or the internet. And you’ll be willing to pay something for it, and advertisers will find it a good way to talk to you, but it won’t be like the old days.

WARREN BUFFETT: Cliff?

CLIFF GALLANT: Thank you. Just on that general topic, it is true that in the past some of your investments have been fairly affected by technology, in newspapers or World Book. Are there other businesses where you’re concerned about technology affecting them, for example, you know, Amazon or online grocery stores? Could they affect a business indirectly, like McLane?

WARREN BUFFETT: Amazon is a tough one to figure. I mean, Amazon — it could affect a lot of businesses that don’t think they’re going to be affected today in the retailing area. It’s huge. It’s a powerhouse. I don’t think it’s going to affect a Nebraska Furniture Mart, but I think it could affect some of the other retailing operations THAT we have. It won’t affect the Nebraska Furniture Mart. I should report to you that in the first four days: Tuesday, Wednesday, Thursday, and Friday of this week, our business at the Furniture Mart is up about 11 percent over last year, so you people are doing your part there. We had — on Tuesday we did over $6 million of business. Now, those of you who are in the retailing business, thinking about a Tuesday and 6 million-plus of volume, we’ll do more probably today, but those are huge, huge volumes. And we’re going to go to Dallas here in a couple of years.

We’ve got a 433-acre plot of ground down there, and I think we’re going to have a store that will make any records we’ve set in the past look like nothing. Going back to Amazon, though, in terms — GEICO was very affected by the internet, and at first, we missed that. I mean, we — GEICO’s got an interesting history. It was mail originally, if you go back into the late ’30s and early ’40s, and it was very successful. And then it moved — not leaving mail totally behind — but it moved to television big time. And then the internet came along, and I thought, originally, that only young people would look for quotes on the internet and that — you know, I mean, I never would have done it. I would have been calling on a rotary dial phone, you know, and saying — when they said number, please, first, I have to get my quote on GEICO — forever. But it just changed dramatically, you know, to the internet.

So, things do change very significantly, and if the consumer finds something they like to do better in some new way — and Amazon has been an incredible success. It’s very hard to find people who have done business with Amazon that are unhappy about the transaction. They have happy customers. And a business that has millions and millions of happy customers can introduce them to new items and then, you know, and it will be a powerhouse, and I think it could affect a lot of businesses. It’s hard for me to figure out.

CHARLIE MUNGER: I think it’s almost sure to hurt a lot of businesses a lot.

WARREN BUFFETT: Which ones do you think it will hurt the most, Charlie?

CHARLIE MUNGER: Well, anything that can be easily bought by using a home computer, or an iPad, for that matter.

WARREN BUFFETT: Which of our businesses do you think it can hurt?

CHARLIE MUNGER: I won’t be buying the stuff because I’m habit bound. Besides, I almost never buy anything. (Laughter) But I think it will hugely affect a lot of people. I think it’s terrible for most retailers. Not slightly terrible, really terrible.

WARREN BUFFETT: Well, with that cheerful assessment, we’ll go to station 10. (Laughter)

AUDIENCE MEMBER: Hi. This is Hector from (inaudible) Industry Fund Management Company in China. My question is, you mentioned acquiring insurance float with zero, or even negative cost, is one of the key competitive advantages of Berkshire Hathaway. And we also found that an average leverage of Berkshire always about 100 percent. I guess the net asset growth will significantly decline without using that leverage. Therefore, to own an insurance company acquiring insurance float would be an important strategy if (inaudible) want to copy Berkshire business model. Would you please give me a comment?

WARREN BUFFETT: Charlie, I didn’t get all that so you —

CHARLIE MUNGER: I didn’t get it all, either. (Laughter) But, we have a very peculiar model, and it works very well for us. I think it’s very hard for other people to get the same result.

WARREN BUFFETT: Yeah, I think it’s almost impossible. Besides, I mean, it’s taken a long, long time to get here. It’s taken a great amount of consistency, and that consistency has been allowed because, basically, we’ve had a controlling shareholder during that time. So we’ve not had to bow to any of the urgings of Wall Street or, you know, whatever may be the fad of the day. But we have had a culture that — where we could write out 13 or 14 principles more than 30 years ago, and we’ve been able to stick with them. And that’s very hard to do for most American corporations, and I think it’s very hard to do when managers come and go and they have small shareholdings. I think it takes a very unusual structure to be able to do it. And, you know, it took a long time to get to the point where people with large private businesses in this country really cared about where those businesses were lodged after they gave up their stewardship.

Took a long time to have it get so that a great many of those people would think of Berkshire first. And the nice thing about it is, if they think of Berkshire first they don’t think of anybody second, so we get the call. We don’t do well buying businesses at auction. I mean, if somebody’s only interest is to get the top price for their business, you know, seldom we’ll get one. We did buy one at auction, I mean, but it was an add-on. The Dutch company we bought yesterday, we bought at auction. But that sometimes happens with our smaller acquisitions. But the big private acquisitions are going to come to Berkshire because they want to come to Berkshire. And that’s a significant competitive edge, and I don’t see how anybody really challenges us on that.

CHARLIE MUNGER: Well, not only do I think other people will have a hard time copying it effectively, I think if Warren went back to being 30 years of age with a modest amount of capital and not much else, he’d have a hell of a time doing it again, too.

WARREN BUFFETT: I’d like to try. (Laughter) OK. Becky?

BECKY QUICK: This question comes from David Schermerhorn (PH) in Boulder, Colorado. And he writes that “Berkshire Hathaway has several substantial investments in other publicly traded companies. “As a shareholder, Berkshire is entitled to annually cast votes on matters such as election of directors, advisory vote on executive compensation, approval of stock option plans, and so forth. “So could you tell us what goes into your thinking and decisions with respect to how you vote our shares in these companies?”

WARREN BUFFETT: Yeah. We virtually never have voted against management, but we’ve done it a couple of times. There have been a —

CHARLIE MUNGER: Yeah, in 50 years.

WARREN BUFFETT: Yeah. There have been a couple of times when we thought — on the question of stock option expensing when that was put on a ballot. If we — there may have been a particularly egregious option grant or something, we might have voted against, but our general feeling is that when we’re a large shareholder of a company that we certainly generally like the business, we generally like the management. We realize that they’re not going to subscribe to our views 100 percent, in many cases 90 percent or 80 percent. Doesn’t mean we think they’re bad people or anything. They just — they have a different — they’re sort of judging by behavior elsewhere. And they’re perfectly decent people, but they don’t think about things exactly the same way we do. But that doesn’t rule out owning a big piece of the business. We are not in the business of trying to change people. We don’t try and change people when we buy the entire business. We think it’s like marrying somebody to change them. It just doesn’t work very well.

CHARLIE MUNGER: Doesn’t work very well with children, either. (Laughter)

WARREN BUFFETT: No. And we know we don’t want anybody to marry us to change us. So I mean, we’re not going to do it — we accept people the way they come, pretty much. Doesn’t mean we look — we decide we’ll associate with anyone, but we don’t expect everybody to be clones of us. And if we were to see a particularly dumb merger, a particularly egregious stock option plan, we might vote against it. It would pass anyway. We wouldn’t conduct a campaign against it. But we have seen a few of our companies engage in some — what we thought were really dumb deals, and we’ve usually been right, but we couldn’t stop them. But we have — I think we’ve voted against maybe one or two of them. Charlie?

CHARLIE MUNGER: Well, I think you’ve said it all.

WARREN BUFFETT: OK. Jay.

JAY GELB: This question is on Berkshire’s commercial insurance operations. Berkshire has a smaller presence in primary commercial lines insurance compared to its much larger reinsurance and auto insurance businesses. Under what circumstances would Berkshire be open to increasing the scale of its primary commercial insurance operations, including acquisitions?

WARREN BUFFETT: Yeah, if we thought we can either expand internally, which would be tough, or buy a great company in the commercial field, which would — that would be the more likely way — you know, we’d do it. Now, we got a chance, I don’t know, six or seven years ago to get in the medical malpractice field when GE wanted out and we bought that, and then we added to that with our Princeton Insurance acquisition last year. So we did get a chance to go into a first-class company with a first-class manager in Tim Kenesey about six or seven years ago, and we jumped at it. And GE was just getting out of the insurance business. So it’s hard to think of very many commercial insurance companies that I would get excited about, a very few. There might be a couple, and we’d like the business. I mean, you know, there are very few personal lines companies we like, but love GEICO, obviously. There are very few reinsurance companies we like, but we love the ones we’ve got.

And if we could find a quality company in commercial lines and we — presumably it would have quality management — we’d buy it in an instant. We’ve got nothing against that business.

WARREN BUFFETT: Station 11.

AUDIENCE MEMBER: Mr. Munger and Mr. Buffett, this is Whitney Tilson. I’m a shareholder from New York. I have a question for Debbie. I’m just kidding. I applaud the fact that you’ve —

WARREN BUFFETT: She’s in the president’s box. (Laughs)

AUDIENCE MEMBER: I applaud the fact that you’ve set a price above which you won’t buy back your stock, but it seems, based on the trading of the stock since the announcement, the wall may have put a floor on the stock. It also may have put a ceiling on it slightly above 1.1 times book value. If so, this is obviously contrary to your desire to have the stock trade close to intrinsic value, which you’ve said is far higher than 1.1 times book. Have you considered being a little more flexible in the price at which you’d buy back your stock depending on how well your business is going and what other opportunities are available? For example, I would much prefer it if you bought back 3.4 billion of your own stock at 1.15 times book value last quarter, rather than the stocks you bought of other companies.

WARREN BUFFETT: Yeah, so would I. But the — I’m afraid — I don’t think it puts a ceiling on, but I do think it certainly has an effect on a floor. It doesn’t make a floor. I mean, you and I have seen enough of markets to know that if things get chaotic or anything like that, floors disappear. So, I think there could be circumstances under which we would buy a lot of stock, but I don’t think they’re, you know, highly likely at all. I think if we were at 115 — and believe me 115 would not be a crazy price — I don’t think we’d probably buy a lot more stock. It might have the effect of the stock selling at, you know, a little above that or even a lot above it, just like 110 can do the same thing. I do think it signals to a lot of people that they don’t have much to lose if they buy it just slightly above the price we’ve named and perhaps they’ve got a lot to gain. But I don’t think it sets a ceiling, Whitney.

When people feel differently in markets, it can sell it at a much different price. If I thought we would buy a whole lot more stock at a slightly higher price, I would probably adjust the price, but I don’t think that’s the case. I think it would just cause everybody to think, you know, I can buy it at this little higher price and have very little to lose, just like they may very well think now. But you get into any kind of a chaotic market — and we’ll have chaotic markets in the future — and we might buy a lot of stock. Charlie?

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

WARREN BUFFETT: OK. We’ll just have one or two more and then we’ll break. Andrew?

ANDREW ROSS SORKIN: OK. This question comes from a shareholder named David Cass (PH) of Maryland. He says, “One of Berkshire’s largest investments in recent years has been Walmart. Has your opinion of this company changed as a result of the Mexican bribery scandal?”

WARREN BUFFETT: No. I think — it looks — if you read the New York Times story, there’s always another side to it. But it looks like they may well have made a mistake in how that was handled, but I do not think it — and it may well result in a significant fine, you know. But I don’t think it changes the fundamental dynamic. I mean, Walmart does operate on low gross margins, which means it offers low prices. And that works in retailing, and a lot of other things they do work in retailing. So I do not see — I mean, it’s a huge diversion of management time and it’s costly and a whole bunch of things, but I don’t think the earning power of Walmart five years from now will be materially affected by the outcome of this situation. Charlie?

CHARLIE MUNGER: Well, these are interesting issues. I’m unaware of any place where Berkshire is slipping on this, but we have so many employees that it’s not inconceivable we could have some slippage somewhere. And you get as big as Walmart, you’re going to have an occasional glitch. I don’t think there’s something fundamentally dishonorable about Walmart.

WARREN BUFFETT: When you have something as big as Berkshire, you’re going to have an occasional glitch. I mean, we have 270,000 people today interacting with customers and government officials and vendors and all kinds of people. I will guarantee you somebody is doing something wrong. In fact, I would guarantee you at least, you know probably 20 people are doing something wrong. You can’t have a city of 270,000 people and not have something going on. And we can talk until we’re blue in the face about what people should do and not do, but people don’t get messages sometimes the same way that you give them, and you know, we’re layers removed from people operating and others. And a lot of people just do crazy things. So it is a — I mean, it is a real worry if you’re running a business like this that — you don’t worry about the fact somebody is doing something wrong, because there is going to be somebody doing something wrong. What you worry about is that it’s material and nothing gets done about it, and that you act fast if you hear about something.

And, you know, we’ve got hotlines and we’ve got all communications and everything, but that does not stop the fact that right now, somebody is doing something wrong at Berkshire. And if we get twice as large someday we’ll have more people. And we try to convey to the managers that when they find out about something, you know, act on it, immediately let us know. We can handle bad news as long as we get it promptly. But I’m very sympathetic to anybody running hundreds of thousands of people to the problems of the ones that — sometimes, you know, they don’t even think they’re doing something wrong. I mean, if you get 270,000 people together, maybe even a crowd this size, you’ll have some very peculiar people in it. (Laughter)

WARREN BUFFETT: OK, we’re at noon, roughly. I made this bet four years ago with a group at Protege Partners about the S&P versus — or an index fund — versus five funds of funds. And I told them at the time I’d put up the results every year. And as you can see — I can’t see it from here, but the first year they — it was a huge down year. And as you might expect, just like us, we beat the S&P a lot in a down year and the last three years, the S&P has beaten them, but we’re still a tiny bit behind the hedge funds at the end of four years. There’s six years to go. You might find it interesting, we each bought a zero-coupon 10-year bond so that there would be $1 million to go to the charity of — selected by either them or by me, depending on who won the bet — and that zero-coupon bond has performed magnificently, much better than Berkshire. (Laughter) We should have bought nothing but zero-coupon bonds.

But the zero coupon bond, because interest rates are so low, you know, is practically selling at par, so we have petitioned the stakeholder in this case — and I don’t think we’ve heard yet — but to let us sell the zerocoupon bond and put the money in Berkshire. And I’ll guarantee them that it will be worth more than a million bucks at the end of 10 years. But so far, the best thing you could have done was ignored both of us and just looked at where we were putting the money. And I will keep you up to date on this bet as we go along and we’re having a lot of fun. We’ll come back in an hour, and then we’ll go till 3:30, and then we’ll have the business of the meeting.

WARREN BUFFETT: OK. Round two. Gary, you’re up.

GARY RANSOM: Am I up yet?

WARREN BUFFETT: You’re up.

GARY RANSOM: OK. A question on General Re. If I look back at the General Re propertycasualty premiums, it’s been cut in half, roughly, from 10 years ago, maybe a little more stable recently. Can you give us some idea of how you’ve had to adjust the personnel over that time, and then also what opportunities are there for General Re to grow as we go forward?

WARREN BUFFETT: Yeah, Gen Re, I think, got off the track. It may — it was probably off the track when we bought it, and I didn’t spot it.

CHARLIE MUNGER: Sure it was.

WARREN BUFFETT: Yeah. I think they’d gotten more concerned about growth and satisfying certain personnel, in terms of their activities, than they had about emphasizing profitability, and it took us awhile to figure that out. And when Joe Brandon came in, he operated 100 percent, in terms of focusing on underwriting profit instead of premium volume, and Tad Montross has followed through on that, with terrific results. But it did mean getting rid of a lot of business that didn’t make any sense. They did an awful lot of what I would call “accommodation business.” So, it’s true that the PC volume dropped very significantly during that period, but it’s not volume that we miss. The life business kept growing consistently during that period. Their life business strikes me as very, very good. They’ve got a little long-term care mixed in there that we wish we didn’t have. But I think Gen Re is — it’s right-size, in terms of people. It’s got an underwriting discipline to it.

And I wouldn’t be surprised if it grows at a reasonable rate in the future. But it, there was a major change that had to be made in the culture at Gen Re. And, you don’t make that overnight, and you don’t keep a lot of the business — or some of the business — that you got through a wrong culture when you do straighten it out. It’s a terrific asset to us now. And I think that, the life business will continue to grow, and I would bet the PC business grows, too. But it will only grow if we see the chance to do it on a profitable basis. That’s one we feel enormously better about than we did some years back. Charlie?

CHARLIE MUNGER: Well, it was a major fix-up operation, but we finally got it done.

WARREN BUFFETT: We don’t go looking for those, though.

CHARLIE MUNGER: No.

WARREN BUFFETT: OK. Station 1.

AUDIENCE MEMBER: Hi. Dan Lewis (PH) from Chicago. I wanted to get your thoughts on two of my concerns about a post-Buffett Berkshire. Do you worry that some of your key operating and investing managers might leave for more lucrative opportunities once they realize they’re working for one of their peers instead of a legend? And do you think it’s possible that a large investor or hedge fund could ever gain enough control of Berkshire to force a change in the unique culture and structure?

WARREN BUFFETT: Yeah. I think that — I would say I virtually know — that the successor we have in mind will not be the kind that will turn off our managers because that — the manager in mind is a — successor in mind — has got the culture as deeply embedded in as I do. They would not — our managers would not — I don’t think it would be a question of leaving for more lucrative jobs. I think it would be because they love the kind of environment in which they exist. And if that environment didn’t exist, it wouldn’t be a question whether the alternative was more lucrative. Many of them, a majority, could retire, wouldn’t need to work at all. They’re only going to work if it’s more fun for them to work than to do anything else, you know, in the world, because they’ve got the money to leave, in a great many cases. The conditions — it’s the same reason I work. I mean, I’m 81, and I am doing what I find the most enjoyable thing to do in the world, and there are a couple reasons for that.

I get to paint my own painting and, you know, I have a lot of fun, working with the people I work. And our managers work for the same reason. They do get to paint their own paintings. And my successor will understand that just as well as I do. And there would be a lot of people that might very well manage other companies that, I think if stuck in my position, would lose a fair number of managers. They just have a different style. And our managers don’t need that style. In terms of a takeover, I think that really gets unlikely. The size is a huge factor. And, even because of the A and B shares, the A shares get converted to B shares when I give them away. And even 10 years from now, it would be likely that I would own, or my estate would own, something in the area, you know, perhaps, of 20 percent of the votes, thereabouts. So the Buffett family will probably have 10 times the voting power, for a long time, of anybody else. So I really — I think it’s extraordinarily unlikely for both those reasons, size and the concentration that will exist.

And the longer we go, the larger we’ll get. So the — as the voting power aspect goes down, the size aspect goes up. So I don’t think there will be a takeover of Berkshire. And I really — you do not need to worry about my successor. You know, in many ways he’ll be better than I am. He will be totally imbued with the culture. The company is imbued with the culture. It would reject anything. The board of directors reflect that culture. It’s everyplace you look around. Berkshire stands for something different than most companies, and, that’s not going to change. Charlie?

CHARLIE MUNGER: Well, what I said last night was that the first 200 billion was hard, and the second 200 billion, with the momentum in place, is likely to be pretty easy compared to what’s been accomplished in the past. So, I don’t think it’s going to hell at all. I think the momentums are in place and the right kind of people are in place and the culture is, by and large, pretty well loved, I would say, by the people who’ve chosen to be in it. Nobody’s going to want to change it.

WARREN BUFFETT: Yeah, the businesses are in place to take it to 400 billion.

CHARLIE MUNGER: Hmm?

WARREN BUFFETT: The business — we have the businesses to take it to 400 billion.

CHARLIE MUNGER: Well, but in addition to that, I think people of the type who have sold to us when we were the only acceptable buyer, I think will come to our successors because they will be the only acceptable buyer, at least for some significant part of what’s done. So I don’t think it’s going to be all that difficult.

WARREN BUFFETT: Don’t make it sound too attractive, Charlie. (Laughter)

WARREN BUFFETT: Carol?

WARREN BUFFETT: No. I mean, the idea, that somebody is bringing something to market today, a seller who has a choice of when to come to market, and that that security, where there’s going to be a lot of hoopla connected with it, is going to be the single cheapest thing to buy out of thousands and thousands and thousands of businesses in the world is nonsense, you know.

CHARLIE MUNGER: And then when it carries a 7 percent commission, or higher. It’s ridiculous.

WARREN BUFFETT: Yeah, it’s ridiculous. So you know it can’t be the most attractive thing. But people get excited about what’s coming and all that sort of thing. But I will guarantee you that if you have thousands of opportunities among stocks all over the world and most of them are not being promoted or being sold with special commissions in them or something else, and then some other security is coming to market that day, when the seller picks the time to bring it, as opposed to just this auction market operating otherwise, you know, it just doesn’t make any sense to spend five seconds thinking about new issues, so we don’t think about them. And we also — you know, there’s industries we know that may have a wonderful future, but we don’t have the faintest idea who the winners will be, so we don’t think about those, either. So there’s a whole lot of things we don’t think about. And we have a — Charlie and I have a number of filters that things have to get through very quickly before we’re willing to think about them.

And sometimes we’re thought of as rude — probably Charlie is thought of that way a little more often than I am — (laughter) — sometimes we’re thought of as rude because people will call us and they start explaining some idea to us, and it just doesn’t make it through the first filter or two. So we just — we think we’re saving their time if we just politely say, you know, that we just have no interest, and we don’t want to have you finish the sentence. (Laughter) But we do that, don’t we, Charlie?

CHARLIE MUNGER: Yeah.

WARREN BUFFETT: We don’t have to do very many things that work. I mean, that’s the beauty of this business. You don’t have to be able, you know, to spell 500 words or something to get to the end of the spelling bee and beat everybody else. You just have to do one or two things every now and then that — where you don’t make a big mistake and where every now and then one works out real well. And the solution — you know, you’ll get a good result. You can’t have a big disaster. You just — that is what we try to avoid. We do not ever want to lose a significant percentage of Berkshire’s net worth, and so far we haven’t.

CHARLIE MUNGER: I think there are a couple little rules of thumb. If it’s got a really large commission in it —

WARREN BUFFETT: Forget it.

CHARLIE MUNGER: — don’t read it. Because the chance of somebody who is paying a very high commission to give you a big advantage is very low. And the other thing that is, I think, helpful in reverse, is — as a place to look, looking at things that other smart people are buying. That is not a crazy search method as a sorting device for opportunities to consider.

WARREN BUFFETT: Charlie knew me when, I used to look at — I grabbed the Graham-Newman reports as fast as they would come out. (Laughs)

CHARLIE MUNGER: Yeah, sure.

WARREN BUFFETT: You know, if Graham Newman was doing something, it was certainly worth my time to look at it.

CHARLIE MUNGER: Warren has made a lot of people rich he doesn’t even know. Just copied him.

WARREN BUFFETT: Don’t go into things with big commissions.

7. Berkshire is “not just an investment company”

WARREN BUFFETT: Jay?

JAY GELB: On the subject of regulation, a question I often get from investors is, what are the implications if Berkshire ends up being subject to the Investment Company Act of 1940 because of insurance becoming a smaller part of Berkshire’s overall business?

WARREN BUFFETT: I don’t — I may be —

CHARLIE MUNGER: That’s too remote. That’s not going to happen.

WARREN BUFFETT: Yeah. I used to — I read the Investment Company Act of 1940 probably 20 times because it was quite pertinent when I was setting up my partnership and all that. I don’t remember every detail now, but I see no way that — that Berkshire comes close to that. We used to worry about both personal holding company status and investment company status, but we steered — we made very clear that we steered clear of both of those. But now — I think we’re a million miles away from it now.

CHARLIE MUNGER: Yeah, we really need the financial heft we have to make our basic businesses work. We are not just an investment company.

WARREN BUFFETT: Yeah. We’ve got 270,000 employees. We own 8 companies that each would qualify for Fortune 500 stand-alone. So it’s — people thought of us as investment company long after we were nothing remotely —

CHARLIE MUNGER: Like one.

WARREN BUFFETT: — like one, and where we had no intention of going in that direction. But the background of both of us caused people to hang on to that notion longer than it was appropriate.

8. Great Chinese companies

WARREN BUFFETT: Station 3.

AUDIENCE MEMBER: Hello, Mr. Buffett and Mr. Munger. Good afternoon. My name is Yung (PH). I’m from Toronto, Canada. I appreciate you giving me this opportunity to stand here and ask a question. And my question is, how long do you think it will take China to appear a great company like Coca-Cola, and in which industry you think it will be? Thank you.

WARREN BUFFETT: How long will it take China to do what?

CHARLIE MUNGER: I didn’t quite get that one.

WARREN BUFFETT: Connection to Coca-Cola, yeah.

CHARLIE MUNGER: How long will it take China to do what?

AUDIENCE MEMBER: Oh, just how long do you think it will take China to appear a great company like Coca-Cola, and in which industry you think?

CHARLIE MUNGER: China already has some great companies. It’s hard to think of a great branded goods company, but China has some very great companies already.

WARREN BUFFETT: Yeah.

CHARLIE MUNGER: (Inaudible). I can’t pronounce them, but they’ve got some very great companies. (Laughter)

WARREN BUFFETT: Yeah. So far it has not been Chinese fast food companies that have been exported to the United States as opposed to — you know, we’ve got over 500 Dairy Queens now in China. We tend to export certain products well, some consumer products, entertainment products, that sort of thing. But China’s got some huge companies and they may eclipse in market value, you know, some of the ones such as Coca-Cola that we’re talking about.

9. Won’t invest in Apple or Google, but wouldn’t bet against them

WARREN BUFFETT: Let’s see, that was station 3. Andrew?

ANDREW ROSS SORKIN: OK. This question comes from Larry Pitkowsky from the GoodHaven Fund, also another shareholder, also asked a similar question that I’ve tried to combine. Given that you’re now in IBM, are there any other entrenched leaders in technology that are, to use one of your terms, inevitable, in the same way that Coke and Gillette were? For example, is Google inevitable? Is it reminiscent of the advertising agencies you owned in the 1970s, i.e., a toll bridge on all digital spending that’s highly likely to keep growing over time? What are the one or two things about Google, for example, that you think are real risks? And what about Apple?

WARREN BUFFETT: Well, those are extraordinary companies, obviously, and both — they’re both huge companies. They make lots of money. They earn fantastic returns on capital. They look very tough to dislodge, where they have their strengths. You know, I would not be at all surprised to see them be worth a lot more money 10 years from now, but I wouldn’t want to buy either one of them. I do not get to the level of conviction that would cause me to buy them. But I sure as hell wouldn’t short them, either. Charlie?

CHARLIE MUNGER: Well, I think we can fairly say that other people will always understand those two companies better than we do. We have the reverse of an edge. And we’re not looking for that. (Laughter)

WARREN BUFFETT: Now he’s going to say isn’t the same thing true in IBM?

CHARLIE MUNGER: Well, I don’t think it is. I think IBM is easier to understand.

WARREN BUFFETT: Yeah. The chances of being way wrong in IBM are probably less, at least for us, than being way wrong with Google or Apple. But that doesn’t mean that those — the latter two companies —aren’t going to do, say, far better than IBM. But we wouldn’t have predicted what would happen with Apple 10 years ago. And it’s very hard for me to predict, you know, what will happen in the next 10 years. They’re certainly — you know, they’ve come up with these brilliant products. There’s other people trying to come up with brilliant products. I just don’t know how to evaluate the people that are out there working, either in big companies or in garages, that are trying to think of something that will change the world the way they have changed it in recent years.

CHARLIE MUNGER: And what do we know about computer science?

WARREN BUFFETT: There’s no reply. (Laughter)

10. Strong freight railroad economics will overcome politics

WARREN BUFFETT: Gary?

GARY RANSOM: Politics sometimes affects your businesses. Recently we’ve seen some coal plant closings, turndown of XL pipeline, all of which seemed to have potential effect on BNSF revenues. Can you talk about how you manage that risk or what the impact might be of some of those political issues?

WARREN BUFFETT: Yeah. Well, BNSF runs their own business very much. I went down to Fort Worth once after we bought it a few years ago, and I haven’t been there since. And I probably talk to Matt on the phone, I don’t know, once every three months or something of the sort. But there’s no question that railroads, utilities, insurance companies, are all very much affected by the political process. Fortunately, I think, in the railroad industry, you know, we’ve got economics on our side. And economics usually win out. I mean, we can move a ton of product 500 miles on one gallon of diesel, and that may be three times or so as efficient as trucking. And that may be why the railroads currently move, say, 42 percent of all intercity traffic. I don’t think our percentage is going to go down, the railroad industry as a whole, no matter what the politics may be. It’s just too compelling to move heavy traffic long distances over steel rail. And in terms of congestion, in terms of emissions, all kinds of reasons.

So we’ve got a wonderful product, and there will always be struggles in the political arena between competitors and railroads, and customers and railroads. It’s just — it’s the nature of the game, and there will be some of that in utilities, too. But overall, I like our position in it. They do have to be involved in politics. I mean, the railroads — all four of the big railroads — are going to be involved in the political process because people have got a — who would like to change some of the rules, either as customers or competitors, are going to be in politics, too, and things will get decided in state capitals ,and more important in Washington, of importance. So they will — they’ll have lobbyists and they’ll play a political game and their opponents will. I like our position. The — it would be very dumb for the country to do anything that discouraged the railroad industry from spending the kind of capital that will need to be spent to take care of the transportation needs of this country in the future.

If you think about the money that will have to be spent on highways, and on the costs involved in there, and the congestion problems, the emissions problems, everything, the country has a strong interest in the railroad industry having every incentive to invest. And the railroad industry pays its own way, you know. We’ll spend $3.9 billion this year, and a lot of it will go to improve our present system an awful lot, and some will go toward expansion of a type. And the country will be better off on that, and the Federal Government will not write a check for it. Charlie?

CHARLIE MUNGER: Yeah. It’s in the nature of things that there are waves of good breaks and bad breaks. Burlington Northern was enormously helped when you could double the container carriage by making the tunnels a little higher and the bridges a little stronger. And they were enormously helped when they found all this oil in North Dakota and there weren’t any pipelines. And they will get some bad breaks, too, occasionally, where somebody will take away a little break. But averaged out, it’s a terrific business with terrific management. I don’t think our main problems are political at all.

WARREN BUFFETT: No. The railroad industry —

CHARLIE MUNGER: For one thing, we’re headed by a prominent Democrat.

WARREN BUFFETT: The railroad industry was — (laughter) — that may not be a help, Charlie. (Laughter) Right after World War II — now, there was a lot of passenger traffic then — but the railroad industry, I think, had as many as 1,700,000 employees in the United States. And here we are today, there’s less than 200,000. I mean, railroads have become so much more efficient, just by a huge factor, and it’s a fundamentally very good way to move heavy stuff a long distance. I mean, it’s hard to conceive of anything — it’s be nice maybe to have barge traffic, but you only got a few rivers that are going to lend themselves to real volume along that line. And so, you know, you have air, pipeline, you know, vehicles, planes, trains. Trains are pretty darn good.

11. No question from station 4

WARREN BUFFETT: OK. Station 4.

AUDIENCE MEMBER: Section 4 does not have any questions at this time. Thank you.

WARREN BUFFETT: Well, that’s a first. (Laughter)

12. Comparing Berkshire to the S&P

WARREN BUFFETT: Carol, have you run out?

CAROL LOOMIS: Unprepared as I am, this is a question about the table on the first page of the annual letter, which shows the relative performance of the S&P 500 index against Berkshire’s book value. “This is an unfair apples-to-oranges presentation. An investor in the S&P 500 index can easily earn the returns shown for the S&P, but an investor in Berkshire will not earn the returns implied by the company’s book values figures shown. “Instead, he or she will earn returns over any given period that depend on the market’s assessment thereof, that is, the price-to-book value ratio, and we’ve seen that go down in the last few years. “A fairer comparison would be against the annual percentage change in the book value per share of the S&P 500 with dividends included. Wouldn’t your shareholders be better served by better information?”

WARREN BUFFETT: Well, actually you can make the calculation two different ways as alternatives to what we do. You could have the market value of the S&P, which is in there with dividends added back, versus the market value of Berkshire. Berkshire would show up better on that table than it does in the table I present. In other words, our advantage over the S&P would be larger if calculated that way because we started at a discount from book value and we ended up at a premium. So it would bounce around the years. But overall, our gain would be probably at least — well, it would be about 35 or so percent higher in aggregate over the time than is shown by the book value gain, which is a lot of dollars when you make the calculation. You could also show the book value of the S&P versus the book value of Berkshire. That figure will be a wash, pretty much, because if you take the S&P’s price to book value, if that maintains the ratio at the beginning to the same ratio at the end, it’s a wash as to how that calculation comes out.

So I think we could show — we could make a calculation that was more favorable to Berkshire. I don’t think what the person suggests there would result in a calculation that’s less favorable to Berkshire.

CHARLIE MUNGER: Long-term, the stock value has tracked fairly well with book value.

WARREN BUFFETT: But it’s over-performed book value —

CHARLIE MUNGER: Yes.

WARREN BUFFETT: — for the whole time. Which is the point this question seems —

CHARLIE MUNGER: Well, you’ve been criticized for making yourself look worse.

WARREN BUFFETT: Yeah. (Laughter)

CHARLIE MUNGER: It’s all right. You can bear it. (Laughter)

WARREN BUFFETT: I’ve done the other, too. (Laughs)

13. We don’t even try to coordinate our subsidiaries

WARREN BUFFETT: Cliff.

CLIFF GALLANT: In studying the collapse of AIG, one of the things we learned is there were parts of the company that understood there were certain financial risks in the market and they were lowering their exposure. While, at the same time, there were other parts of AIG which were actually increasing their exposure to the same risk. In terms of enterprise risk management at Berkshire, how do you share information across units to make sure that the same mistakes aren’t made?

WARREN BUFFETT: I didn’t totally get that. Did you get that, Charlie?

CHARLIE MUNGER: Well, he was talking about how do we share information across units. Well, if there’s any sharing, they’re doing it; we’re not.

WARREN BUFFETT: Yeah. We don’t —we don’t have any — we’re the most uncoordinated pair of individuals, operating both in sports or at the executive level. There are certainly some people at Berkshire that have some contact with other people at Berkshire, but there’s nothing in the way of an organized way of doing that. I mean, [Gen Re CEO] Tad [Montross] and [GEICO CEO] Tony [Nicely] and [reinsurance chief] Ajit [Jain] are friends, and [National Indemnity President] Don Wurster, and they see each other sometimes so they’re — and I’m sure they talk insurance. But we don’t make any attempt — if somebody goes in to get a quote from Gen Re and gets a quote from Ajit, there’s no — we have no system that prevents — or that coordinates — our two units to give the same quote or anything of the sort. We want our businesses to run very autonomously, and we want the managers of those businesses to feel like they’re their own business. That’s enormously important at Berkshire.

So we don’t tell the people at Clayton Homes to buy their carpet from Shaw or to buy their paint from Benjamin Moore. We just don’t do that. And you could say that’s kind of silly, but it’s — any gains we would get from doing that, by selling incremental units, I think would be far offset by the change in the feeling of the manager as to whether they’re really running their own business. We hand people billions of dollars and they hand us stock certificates and they have been running those businesses for decades in many cases. And we want them to feel the same way the next day, when they’ve got the money and we’ve got the stock certificates, as the day before when they had the stock certificates and we had the money. And the moment we start telling them how to change the way they operate, or to coordinate with this guy, or get this person’s approval, or anything like that, you know, that just erodes that advantage, which we think is very substantial, that they have this proprietary feeling about their business. Have I answered that, Charlie?

CHARLIE MUNGER: Yeah. We’re trying to fail at what you wanted us to succeed at. (Laughter)

WARREN BUFFETT: I’ll have to think about that a little. (Laughter)

14. Acquisition of a forest products company unlikely

WARREN BUFFETT: Station 5?

AUDIENCE MEMBER: Hello, Charlie and — Warren.

WARREN BUFFETT: I’m Warren, yeah. (Laughs)

AUDIENCE MEMBER: Yes. Well, my name is Richard Cooper, and I’m from Honor, Michigan. And I’m a professional forester. Trees are one of America’s greatest resources, and it seems that a well-run forest products firm would fit well with Berkshire’s holdings. You’ve got the transportation system to move the product. You have the construction firms to use the product — furniture companies, home builders — and you’ve got insurance companies to cover the insurance end of the holdings. Have you given any thought to getting a forest products firm?

WARREN BUFFETT: Well, your question touches on the answer we just gave. We would not really consider the other activities that Berkshire has in determining whether we would get into forest products. We’ve looked at forest products companies, but we don’t think about them in terms of how they may divert their products to some other subsidiaries of ours, or how other subsidiaries might benefit from selling them something. To date, we’ve looked at several. To date, we’ve never really found any that met our test for returns against purchase price. I mean, it’s a business that’s easy — or reasonably easy — to understand, I mean, in terms of the economics and its permanence and all that sort of thing. But the math has escaped us, in terms of being compelling. Charlie?

CHARLIE MUNGER: A lot of forest products companies convert themselves into flow-through partnerships of some kind so they don’t pay normal full corporate income taxes the way we do. Berkshire is actually organized so that we’d be a disadvantage — we’d be at a disadvantage — in bidding for forests.

WARREN BUFFETT: Yeah. We’re at a disadvantage in terms of any kind of activity that people manage to convert into pass-through organizations. So particularly — take REITs, Real Estate Investment Trust, you know, they have eliminated one tax in their structure that we would bear. And like Charlie says, you know, you have firms like Plum Creek Timber and those sort of operations where they have eliminated the federal income tax, and we don’t have any structure like that. So just going in, we have a structural disadvantage that is really quite significant.

15. No magic formula for calculating risk

WARREN BUFFETT: Becky?

BECKY QUICK: This question comes from Scott Bondurant who is from Chicago, Illinois, and he’s a shareholder. And he asks, “Can you please elaborate your views on risk? You clearly aren’t a fan of relying on statistical probabilities, and you highlight the need for $20 billion in cash to feel comfortable. Why is that the magic number, and has it changed over time?”

WARREN BUFFETT: Yeah. Well, it isn’t the magic number, and there is no magic number. I would get very worried about somebody that walked in every morning and told us precisely how many dollars of cash we needed to be, you know, secured at three sigma or something like that. Charlie and I have had a lot of — we saw a lot of problems develop in an organization that expressed their risks in sigma, and we even argued sometimes with the appropriateness of how they calculated their risk.

CHARLIE MUNGER: It was truly horrible.

WARREN BUFFETT: And they were a lot smarter than we were. (Laughs) That’s what’s depressing. But we both have the same bend of mind whereby we think about worst cases all the time, and then we add on a big margin of safety, and we don’t want to go back to go. I mean, I enjoy tossing those papers in the other room, but I don’t want to do it for a living again. So we undoubtedly build in layers of safety that others might regard as foolish, but we’ve got 600,000 shareholders and we’ve got members of my family that have 80 or 90 percent of their net worth in the company. And I’m just not interested in explaining to them that we went broke because there was a onehundredth of 1 percent chance that we would go broke and there was a — the remaining probability was filled by the chance of doubling our money, and I decided that that was just a good gamble to take. We’re not going to do that. It doesn’t mean that much.

We are never going to risk what we have and need for what we don’t have and don’t need. We’ll still find things to do where we can make money, but we don’t have to stretch to do it. And it’s my job — and Charlie thinks the same way. We don’t have to talk about it much. But it’s our job to figure out what can really go wrong with this place and, you know, we’ve seen September 11th, and we’ve seen September of 2008, and we’ll see other things of a different nature but similar impact in the future. And we not only want to sleep well all those nights, we want to be thinking about things to do with some excess money we might have around. So it is — if you’re calibrating it in some mathematical way, I would say it’s really dangerous. I could give you a couple examples on that, but unfortunately I’ve learned about them on a confidential basis.

But some really great organizations have had dozens of people with advanced mathematical training and make — and thinking about it daily, making computations, and they don’t really — they don’t really get at the problem. So it’s at the top of the mind, always, around Berkshire, and your returns in 99 years out of 100 will probably be penalized by us being excessively conservative, and one year out of a hundred, we’ll survive when some other people won’t. Charlie?

CHARLIE MUNGER: Yeah, how do these super-smart people with all these degrees in higher mathematics end up doing these dumb things? I think it’s explainable by the old proverb that, “To a man with a hammer, every problem looks pretty much like a nail.” They’ve learned these techniques and they just twist the problem so they fit the solution, which is not the way to do it.

WARREN BUFFETT: And they have a lack of understanding of history, I would say. One of the things — in 1962, when I set up our office in Kiewit Plaza, where we still are, it’s a different floor, I put seven items on the wall. Our art budget was $7, and I went down to the library, and for a dollar each I made photo copies of the pages from financial history. And one of those cases, for example, was in May of 1901 when the Northern Pacific Corner occurred, and it’s kind of interesting in terms of being in Omaha because Harriman was trying to get control of the Northern Pacific, and James J. Hill was trying to control the Northern Pacific. And unbeknownst to each other, they both bought more than 50 percent of the stock. Now, when two people buy more than 50 percent of the stock each, and they both really want it, they’re not just going to resell it. You know, interesting things happen.

CHARLIE MUNGER: To the shorts.

WARREN BUFFETT: And in that paper of May 1901, the whole rest of the market was totally collapsing because Northern Pacific went from $170 a share to $1000 a share in one day, trading for cash, because the shorts needed it. And there was a little item at the top of that paper, which we still have at the office, where a brewer in Troy, New York, committed suicide by diving into a vat of hot beer because he’d gotten a margin call. And to me, the lesson — that fellow probably understood sigmas and everything and knew how impossible it was that in one day a stock could go from 170 to 1,000 to cause margin calls on everything else. And he ended up in a vat of hot beer, and I’ve never wanted to end up in a vat of hot beer. (Laughter) So those seven days that I put up on the wall — life in financial markets has got no relation to sigmas. I mean, if everybody that operated in financial markets had never had any concept of standard errors and so on, they would be a lot better off. Don’t you think so, Charlie?

CHARLIE MUNGER: Well, sure. (Laughter)

WARREN BUFFETT: Here, have some fudge. (Laughs)

CHARLIE MUNGER: It’s created a lot of false confidence and — now, it has gone away. Again, as I said earlier, the business schools have improved. So has risk control on Wall Street. They now have taken the Gaussian curve and they’ve just changed its shape.

WARREN BUFFETT: Threw it away.

CHARLIE MUNGER: They threw it away. Well, they just made a different shape than Gauss did, and it’s a better curve now, even though it’s less precise.

WARREN BUFFETT: They talk about fat tails, but they still don’t know how fat to make them. They have no idea.

CHARLIE MUNGER: Well, but they knew — they’ve learned through painful experience they weren’t fat enough.

WARREN BUFFETT: Yeah. They learned the other was wrong, but they don’t know what’s right.

CHARLIE MUNGER: We always knew there were fat tails. Warren and I, in the Salomon meetings, would look over at one another and roll our eyes when the risk control people were talking.

16. Swiss Re contract expiration is “nonevent”

WARREN BUFFETT: OK. Jay?

JAY GELB: This question is on Swiss Re. Berkshire’s quota share treaty with Swiss Re, covering 20 percent of Swiss Re’s propertycasualty risk, ends in 2012. Does Berkshire plan to replace that premium volume through another transaction?

WARREN BUFFETT: Well, we would hope to — we always hope to get more good volume, but what we do has no relationship to the expiration of that contract. I mean, that contract was a five-year contract. It’s a big contract, billions of dollars a year. But the fact that that expires and our premium volume will go down by multiple billions does not cause us to do one thing differently than we would do otherwise. We’ve got the capacity to write billions and billions of business, and we would love to do it if we were expanding the Swiss Re contract, and we don’t want to write any dumb business when we lose that contract. It’s just — it’s a nonevent, in terms of future strategy. It’s not a nonevent, in terms of losing some business that we like, but it’s a nonevent in terms of any future strategy. We regard every decision, you know, as independent. We don’t do — if money comes in, that doesn’t cause us to want to think about doing something today that we weren’t thinking about doing the day before.

We just don’t operate that way. We’ll have things that come along that are terrific, and that doesn’t mean the next day we don’t want to look for something in addition that’s terrific. Every decision is sort of independent.

CHARLIE MUNGER: I don’t think there’s another large insurance operation in the world that is more cheerful about losing volume than we are. If it doesn’t make sense —

WARREN BUFFETT: We don’t want it.

CHARLIE MUNGER: — if the business has to shrink, we let it shrink.

WARREN BUFFETT: We don’t measure ourselves in any way —

CHARLIE MUNGER: By size.

WARREN BUFFETT: — by size, except by the growth in value over time.

17. Housing problems after Fannie and Freddie “left the tracks”

WARREN BUFFETT: OK. Station 6.

AUDIENCE MEMBER: Wendy Wasserman (PH) from Boston. Warren, best wishes on a speedy and complete recovery. My question is regarding Fannie Mae and Freddie Mac. You wrote that you expected the housing market to be improved by now but that it hasn’t improved. You spoke about demographics and the housing-dependent parts of the business. You did not, however, speak about Fannie and Freddie. Fannie Mae, the Federal Reserve, and Freddie Mac are the three largest financial institutions. Then comes J.P. Morgan and Bank of America. Fannie and Freddie have been in conservatorship for 3 1/2 years, the longest. Initially they had combined assets of 1.6 trillion, each a Lehman Brothers. Now they have 5.5 trillion, adding 4 trillion of off-balance sheet items and government mortgage modification programs. They are public companies with operating losses, a negative net worth, owned by the government, acting at times with the power of the government, financed with a blank check from Treasury, and taxpayers, who are usually also homeowners. Most near-bankrupt companies shed assets. These two added assets and liabilities. AIG and General Motors have emerged; these two have not.

Contrary to popular belief, the securities law did not need the biggest rewriting since the Great Depression. The 1933 and 1934 Securities Acts worked. Sarbanes-Oxley works. Fannie and Freddie, and the 1938 and 1968 governing laws, do not, no matter how much they have contributed to U.S. housing standards. What is the solution? How many years can they stay in conservatorship? Can the resolution trust authority be used? Are they truly too big to fail? What role will banks like Wells Fargo and U.S. Bancorp, who are leading mortgage players — (applause) — play now that they are well capitalized? What happens to the MBS market and the (inaudible) system? How can housing improve even with better demographics without an answer to Fannie and Freddie?

WARREN BUFFETT: Well, I got through college answering fewer questions than that. (Laughter and applause) I would say that the overall tone of your remark, which indicates that you think Fannie and Freddie are a mess, is probably justified. And of course, the reason they’re a mess is we haven’t figured out yet, or we can’t get agreement, on what the best structure is to have in this country going forward to generally finance mortgages. There’s no question that a government guarantee program brings down the overall cost of financing mortgages over time. And then we had one, of course — we’ve had several — but we had one in Fannie and Freddie that went wild when we introduced the profit motive into the mix of two institutions that really were half trying to serve a housing mission and half trying to serve a profit mission, and gradually the profit mission sort of overcame the housing mission. Congress hadn’t sorted that out yet. It’s a huge item, obviously. There are roughly 50 million residential mortgages in the United States, you know, and they total 10 trillion or so.

It’s important that you have a market that does minimize costs for borrowers who have adequate down payments and adequate income and all of that. And I think for a while, we were going in that direction with Fannie and Freddie, and then they left the tracks. But that’s going to get — how long they can stay in conservatorship? They can stay there a long time. They will stay there, in my view, until politically we get some kind of a resolution that — as to a future policy — that both parties can go along with, and it looks to me that’s a ways off. Charlie?

CHARLIE MUNGER: Well, of course, the interesting thing is that Canada, right to the north, kept a more responsible real estate lending system, and they had almost no trouble. We departed completely from sanity and decency and morality in mortgage lending in the United States, and the government of the United States participated in the folly, and they did it in a big way. And it was wrong not to step on the boom that was obviously so full of fraud and folly. And I sometimes say that [former Federal Reserve Chairman] Alan Greenspan overdosed on [author] Ayn Rand when he was young. (Laughter) He thought if an ax murder happened in a free market, it was probably all for the best. And so we had — there’s a lot of disgraceful behavior we have to regret, in terms of what happened, and it caused enormous damage. And a modest little country like Spain, and another one called Ireland, you had something somewhat similar. People just allowed craziness to go unchecked, and that was a big mistake. And Greenspan was really wrong.

It’s the duty of the government to step on crazy market booms — (applause) — and prevent them by keeping sound policies, as Canada did. And so you put your finger on a very disgraceful episode in United States history. But once we were into it, I think we had no option but to do exactly as the government did, which was to nationalize Fannie Mae and Freddie and try to make them behave better in the future, and that’s what’s happened.

WARREN BUFFETT: It’s going to be a long runoff. And Congress, it wasn’t just the Fed— Congress did their share in that, too. But it was —

CHARLIE MUNGER: Everybody did.

WARREN BUFFETT: Everybody did. I mean, it —

CHARLIE MUNGER: By the way, we didn’t. (Laughter)

WARREN BUFFETT: Charlie, we resigned from the Savings and Loan League a good many years ago just because we thought such nutty stuff was going

标题：2012年年度会议

第五部分/共六部分

他有很多业务问题需要处理，却把大量时间花在跟投资者交谈上，这对他毫无益处。我的意思是，他应该去跟客户或员工之类的人交流，但他——我认为不少经理人可能不得不花时间跟律师、银行家或投资者打交道，而他们真正喜欢做的是经营自己的事业，我们给了他们最好的机会去这么做。所以我无法把激情注入到别人的工作中，但我绝对可以创造一种结构，把激情从他们身上夺走。伯克希尔在这方面是一种消极的艺术。我们专注于不去破坏本来已经很好的东西，这就是我的工作。我觉得接替我的人也会做非常类似的工作。但我们拥有一批其他公司挖不走的经理人，如今在全国范围内，有多少规模相当的公司能做到这一点？我认为我们将在未来几十年里保持这一优势。这种模式行之有效，公司内部的人都知道它有效。

所以这是自我强化的，没有什么比看到你设计的东西有效更能让你渴望延续它并在此基础上进一步发展。查理？

查理·芒格：嗯，我们没有任何像一些大公司那样的标准公式，比如X%用于多元化，Y%用于其他方面，Z%用于别的，然后所有人都把这些东西交给一个庞大的人力资源部门处理。而且每个关键高管的激励安排都互不相同，所以我们无法给你提供标准公式。我们根本没有。

沃伦·巴菲特：我们的业务全都非常不同。试图搞一个统一的安排，比如涉及资本回报率——有些公司根本不使用任何资本——或者营业利润率，那简直是疯了。我们可以请薪酬顾问来，他们——

查理·芒格：我们从来没请过。

沃伦·巴菲特：对，我们永远不会。但是，他们总是想让雇主满意，以便获得其他推荐。我敢保证，你去很多公司，如果有一个薪酬委员会，它定期开会，人力资源副总裁会进来，可能建议请一个薪酬顾问。人力资源副总裁想得到谁的认可？CEO的。薪酬顾问想得到谁的认可？他们想被CEO和人力资源副总裁推荐到别处。所以你会得到什么样的体系？你得到我所谓的“棘轮效应，棘轮效应，然后中奖”。伯克希尔不会有这些，而且我说了，它一直运行得很好。我们在伯克希尔确实有人赚了很多钱。我们的数字有八位数的，大概有一页半左右，我前几天看到的，都是超过一百万美元的，以后还会更多。

但这在几乎所有情况下都与合理的业绩衡量标准相关。我们花在这上面的时间就是——我就是六七十个人的薪酬委员会，而且我并不累。（笑声）查理，还有什么要补充的吗？

查理·芒格：嗯，过去几年，我曾评论过薪酬顾问，说卖淫对他们来说都是进步。（笑声）

沃伦·巴菲特：查理也负责伯克希尔的外交事务。（笑声）我们说过，今天结束前我们会把所有人都得罪一遍。（笑声）甚至还没到三点半。

22. 温和的GDP增长随时间推移会产生“惊人”的累积效应

沃伦·巴菲特：9号台。

听众：下午好，先生们。（听不清），弗吉尼亚州阿灵顿。我有一个问题问你们。怎样才能让美国经济再次实现4%的增长？

沃伦·巴菲特：嗯，查理，这对我来说太简单了。你来回答。（笑声）

查理·芒格：很多。很多。这并不容易。

沃伦·巴菲特：不。但如果人口每年增长1%，实际GDP每年增长2.5%，以2000年或5000年的标准来看，这将是了不起的。我的意思是，这将导致每个世纪实际人均GDP翻两番。我们并不是说实际增长4%不好，但2.5%的增长，虽然可能让我们缓慢走出几年前陷入的低谷，但对于一个已经享有非常高生活水平的国家来说，这确实是一个非常了不起的增长率。对于一个每年人口增长1%的国家来说，这是一个非常了不起的增长率。在一个人一生中，这是巨大的。我多次说过，在我的一生中，实际人均GDP增长了六倍。

查理·芒格：但远远达不到每年4%。

沃伦·巴菲特：对。这是惊人的。非常惊人。美国的人均GDP大约是48,000美元。我们富得令人难以置信。但很多很多人并没有这种感觉，而且在很多情况下，这是有充分理由的。但我们有一个了不起的国家值得为之努力——与之合作。它拥有各种优势。而且有如此巨大的丰富性——如果我的父母在1930年，有人告诉他们，当我81岁时，我将生活在一个比他们那一代人均产出高出六倍的国家，他们会认为这将是一个乌托邦。而且我可以补充说，这并不坏。但我们国家并不是一团糟。我们的政治可能是一团糟，但产出——（掌声）——是非常棒的。查理，如果让你猜测未来20年美国实际人均增长率，你认为会是多少？

查理·芒格：扣除通胀后？

沃伦·巴菲特：不，是实际值。

查理·芒格：实际，我就是这个意思。扣除通胀后？

沃伦·巴菲特：是的。

查理·芒格：嗯，如果上帝来担保，我愿意接受一个非常低的数字。我认为我们是一个非常成熟的经济体，有大量的社会安全网，以及来自新兴国家的大量竞争，我认为人均实际增长1%将是一个轰动性的结果。

沃伦·巴菲特：是的，这意味着20年后，人们的生活平均会提高近25%。这不错。这是一代人——一代人的时间。

查理·芒格：你把期望值设得太高了。当你认为世界应该提供4%的增长时，你就是在自找麻烦。

沃伦·巴菲特：它做不到。

查理·芒格：这就是房地产繁荣时期发生的事情。人们产生了愚蠢的梦想，然后开始做蠢事，试图达到无法实现的目标。

沃伦·巴菲特：但如果有1%的增长，那就意味着每一代人的生活水平比他们的父母高出20%以上。

查理·芒格：对于这个基础来说，这将是一个轰动性的结果。

沃伦·巴菲特：在我看来，我们很可能会实现。增长不会是均匀的，但这个体系仍然有效。顺便说一句，你实际上看到了——即使在2008年秋天那场令人难以置信的崩盘之后，我们看到了巨大的韧性，当然，与欧洲相比，它看起来尤其强劲，但是——

查理·芒格：是的，但是韧性在企业方面比在就业方面表现更好——

沃伦·巴菲特：是的。

查理·芒格：——这太糟糕了。

沃伦·巴菲特：是的。企业表现异常出色。企业利润占GDP的比重去年达到了高点——当然我们自己的也是如此。这对政治体系产生了很大压力。嗯，我们在这个问题上已经思考得够多了。

23. 巴菲特不会向超级政治行动委员会捐款

沃伦·巴菲特：那么，我们转到10号台。

听众：嗨，沃伦。我是来自科罗拉多州丹佛市的亚瑟·刘易斯（音），佩顿·曼宁的新主场。但我的问题是——

沃伦·巴菲特：那也是约翰斯曼维尔的所在地。（笑声）

听众：我的问题是，随着大选临近，你有没有考虑过向超级政治行动委员会捐款，以试图保护竞争优势？

沃伦·巴菲特：没有，我不会的。你知道，我希望它从未——（掌声）——[美国最高法院案件]“联合公民案”从未发生。这非常诱人，我会听到有人向我提出这种论点。人们会说，嗯，我们也不相信这一套，但他们那边正在这么做，对方有数亿美元涌入，而你仅仅因为原则就要自缚双手吗？但是，你知道，我认为超级政治行动委员会的整个想法是错误的，我认为相对少数人用巨额金钱影响政治的想法是错误的。我认为我们已经从许多其他因素中看到了足够的对富豪统治的推动，我们不需要把它再注入到投票过程中。我可以这样说——我要为[拉斯维加斯金沙集团CEO和共和党捐款人]谢尔登·阿德尔森说句话——他和他的妻子可能已经投入了1200万左右。

他这么说，我完全相信他。他说同样的道理。他认为这个体系是错误的，但他说这就是体系的运作方式。所以他必须——你知道，他必须参与，否则其他人会参与，而他就不会。我可以理解这一点，但我不想这么做。我只是认为，你必须在某个地方表明立场。而我应该把1000万美元扔进某个超级政治行动委员会，让它整天误导人们对对手的行为或记录的看法？我不想看到民主朝那个方向发展。查理？（掌声）

查理·芒格：嗯，我通常很消极，我对我们政治的现状极其消极，两党都在搞选区划分，要求统一思想，这样两边的极端分子就能获得所有权力。我记得我们两党合作搞马歇尔计划的时候。那才更像我心目中的世界。所以我不喜欢这样。话虽如此——（掌声）——我认为我们很幸运能有两位这么好的候选人。考虑到这个体系，我认为今年我们做得相当不错。

沃伦·巴菲特：你会怎么看待向超级政治行动委员会捐款，如果对方在他们的超级政治行动委员会上有更多的资金？

查理·芒格：嗯，在某些议题上，如果我认为有效，我会向超级政治行动委员会捐款。如果我认为可以大幅减少美国合法化的赌博，我愿意花一些钱来实现它。（掌声）我认为这对我们没有好处。就我们允许证券市场变得更像赌场而言，我认为这也是一个愚蠢的结果。（掌声）

沃伦·巴菲特：是的。如果你在外面有个超级政治行动委员会，那就去找查理，别找我。

24. 别担心伯克希尔的短期股价波动

沃伦·巴菲特：11号。

听众：格伦·汤，T2 Partners，来自纽约的股东。在昨天接受贝基采访时，芒格先生评论说，在过去，伯克希尔的大部分价值都嵌入在投资组合中，其价值大概相当于账面价值。如今，大部分价值在于控股企业，我们认为这些企业的价值远高于账面价值。有鉴于此，伯克希尔·哈撒韦的内在价值，作为账面价值的倍数，应该随时间推移而增加，然而伯克希尔的市净率却在下降。我试图理解这一点。自今年年初以来——抱歉——自去年年初以来，伯克希尔的投资组合价值增加了200亿美元，你们收购了路博润。控股企业运营得热火朝天，可股价却纹丝不动。“市场先生”是不是只是处于某种狂躁状态？

沃伦·巴菲特：查理？

查理·芒格：嗯，我会说不，但我说这是事物的本性，市场不会在你想要的时候完全如你所愿。我认为随着时间的推移，“市场先生”会好好对待伯克希尔的股东，我不会太担心这六个月或这十二个月发生的事情。我认为如果短期导向是你的兴趣所在，那你在这个房间里其实并不太受欢迎。（掌声）

沃伦·巴菲特：不过，你可能也会同意，伯克希尔相对于其价格，可能比一年前更便宜了一些。

查理·芒格：是的，绝对如此，如果这是你的衡量标准。你对伯克希尔的安全边际应该感觉更好吗？是的，没问题。

25. 伯克希尔为何没有派发股息

沃伦·巴菲特：好的。1号台。

听众：下午好。基于您早些时候——哦，我是来自明尼苏达州双子城的罗伯塔·科尔（音）。基于您今天上午早些时候的评论，我们理解您会回购股票以帮助提高股价。我们的困惑在于，并且希望得到澄清，为什么您不愿意在股价过高无法回购、且又有闲置现金的情况下，不定期地派发股息，特别是在当前低利率环境下。我们期待您的澄清。谢谢。

沃伦·巴菲特：是的。总的来说，我们觉得，也许是没有证据支持，但到目前为止是被证明的，我们可以通过投资创造超过一美元的现值。有时，如果股票便宜，我们可以通过简单地回购股票来创造超过一美元的现值。但即使那个选项不可用，我们觉得通过保留每一美元，总体上——我们可以将其转化为超过一美元的现值。47年来，这一直有效。我的意思是，我们保留的每一美元都变成了超过一美元的价值。所以，如果有人想从中创造自己的收入流，他们每年卖出一点股票，比从我们这里获得股息要好得多。如果他们卖出2%的持股，会比我们支付2%的股息让他们每股在伯克希尔的投资更多。所以到目前为止，数学的论证是令人信服的。现在的问题是，我们未来能否继续这样做。

但到目前为止，在我们历史的任何时点，如果我们支付了股息——我在20世纪60年代支付了每股10美分，那是一个大错误，但——我们不会再犯。如果我们支付了股息，我们的股东净赚的钱会比把钱留在公司里少。我认为这种情况会持续下去，但谁知道呢？查理？

查理·芒格：嗯，我认为股息终将到来，因为最终我们会发现很难再“繁殖兔子”了，但我们希望那个不祥之日能推迟到来。

沃伦·巴菲特：而且过去几年的事件在这方面是令人鼓舞的。

查理·芒格：是的，绝对如此，尤其令人鼓舞。

沃伦·巴菲特：是的。在能够将资金以我们认为当时能创造超过一美元现值的方式投入运作方面，过去几年比我们预期的要好。

查理·芒格：你知道，中美能源在未来十年或十五年可能会有非常不寻常的机会，以非常合理的回报率动用巨额资本。

沃伦·巴菲特：也许1000亿。

查理·芒格：什么？

沃伦·巴菲特：也许1000亿。

查理·芒格：也许1000亿美元。你可以理解为什么这不会让我们对股息太过兴奋。

沃伦·巴菲特：等我们老了再考虑吧。（笑声）

查理·芒格：更老的时候。（笑声）

26. “学习，再学习，不断学习”

沃伦·巴菲特：2号。

听众：嗨，沃伦和查理。我是来自德国的托马斯·舒尔茨（音）。你们曾经说过，如果现在只有100万美元可以投资，你们可以实现每年50%的回报率。以你们现在的知识，你们如何能够改进你们当初成立合伙企业时已经非常出色的表现？

查理·芒格：我们无法用现在的资源做到我们曾经做过的事。有很多事情我过去做得更好，现在做不到了。（笑声）

沃伦·巴菲特：嗯，你可以坦白那些，查理。（笑声）

查理·芒格：所以——

沃伦·巴菲特：嗯，但我认为他可能是在引导我们思考，自从我们达到那个水平以来，我们在管理中学到的东西，是否让我们现在用100万美元能做得比那时候用100万美元更好。我会回答是的。你不这么认为吗？

查理·芒格：是的，我认为这是真的。

沃伦·巴菲特：是的。

查理·芒格：外面的世界混乱得够多了。如果你有无穷的时间，只有非常少量的资金，我认为你可以找到做得相当不错的方法。

沃伦·巴菲特：在大约50多年的时间里，我们可能学到了更多，或者接触了更多，以至于如果我们回到百万美元的水平，我们会知道更多的寻找地点，我认为。

查理·芒格：嗯，我说伯克希尔有趣的地方在于，你们很多人已经在这里很久了，实际上看到了它发生。如果沃伦没有一直在学习、学习、再学习，伯克希尔的历史记录会比实际情况糟糕得多。我的意思是，每十年，为了让记录体面，他必须学会做一些他在该十年开始时还不知道怎么做的事情。我认为这在很大程度上是人类的条件，当然，他正在变老。我非常担心他。（笑声）

沃伦·巴菲特：我拒绝评论。（笑声）

27. 从别人的愚蠢中学习

沃伦·巴菲特：好的。3号台。

听众：嗨。我叫杰夫·陈（音）。我来自旧金山。我26岁，在那里经营一家软件初创公司。我的问题是关于减少错误。我发现，回顾过去，我在业务中犯了很多错误。我想知道，除了更努力地思考和从自己的错误中学习，你们用来减少错误的最有效技巧是什么？

沃伦·巴菲特：是的。嗯，我——我们犯过错误；我们还会犯更多错误。我们——我们在思考时不太——我们考虑的是不要让自己暴露在任何可能真正损害我们明天继续游戏能力的错误中。所以我们总是考虑最坏的情况，另一方面，我们俩都有做大事的自然本能。所以我们必须考虑我们是否在做任何真正大、可能带来非常可怕后果的事情。我想说，A）我不太担心错误，我的意思是，从错误中学习的想法。下一个错误是不同的东西。所以我不会坐下来思考我的错误以及我将来会以不同方式做的事情或类似的事情。我想说，你可能会得到一些优势——我认为这些年来我学到了一些东西。但我没有在基本投资哲学上学到更多。我在19岁时就学到了，现在仍然——我认为这些年来我更多地了解了人。我会在人身上犯错误。

你知道，这是不可避免的。但我认为我会在判断人方面做出更多正确的判断。我会比四五十年前更好地识别出杰出的人。所以我认为这有所改善，但我认为肯定不是通过有意识地坐下来专注于我在那个人或这个人身上犯了什么错误而改善的。我根本不那样运作。查理？

查理·芒格：沃伦，我会说，你所做的，以及我在较小程度上所做的，是从别人的错误中学到了很多。这其实是一种更愉快的学习艰难教训的方式。（笑声）这些年来我们确实在这方面下了功夫，部分原因是我们发现人类错误的各种形式及其原因非常有趣。我认为这种对其他人的灾难和错误持续不断的研究对我们帮助极大，你不觉得吗，沃伦？

沃伦·巴菲特：哦，是的，的确如此。就阅读金融史之类的东西而言，我一直完全着迷于阅读灾难方面的书。（笑声）毫无疑问。我的意思是，当你看到人类的愚蠢时——你知道，我专注于金融领域的愚蠢——其他地方也有各种各样的愚蠢——但仅仅是金融领域就足以提供大量素材，如果你喜欢追随愚蠢的话。我确实认为理解——这让我们比那些智商180、能用我们做不到的数学方法做事的人有了一些优势。他们只是——真的不了解人类的行为方式以及会发生什么。2008年也是一个很好的例子。所以我们——我们一直是别人愚蠢行为的学生，这让我们受益匪浅。

28. 我们不构建强大的进入壁垒，我们购买它们

沃伦·巴菲特：4号台，我们有提问了吗？

听众：约翰·博克斯特斯（音），马萨诸塞州达特茅斯，如你们所知，毗邻新贝德福德，伯克希尔曾经的所在地。我的问题是，你们如何构建进入壁垒，尤其是在那些几乎没有壁垒的行业？

沃伦·巴菲特：哪些行业有？

查理·芒格：很少有进入壁垒。

沃伦·巴菲特：哦。

查理·芒格：我们如何构建壁垒？

沃伦·巴菲特：相当难。（笑声）

查理·芒格：是的。我们某种程度上是购买壁垒，而不是构建它们。（笑声）

沃伦·巴菲特：是的。嗯，想想看，因为这是真的。非常——有些行业永远不会建立进入壁垒。在这些行业里，你最好跑得很快，因为有很多其他人也在跑，看着你在做什么，试图找出你的弱点或他们能做得稍微好一点的地方。你真的——一个强大的进入壁垒，是这样的。如果你给我10亿、20亿、300亿美元，让我去尝试用一种新的可乐饮料击垮可口可乐公司，我完全不知道怎么做。我的意思是，全世界有数十亿人在脑海里对可口可乐有某种认知，你不可能用10亿或200亿美元改变它。

查理·芒格：是的，但我们购买的大品牌，不是我们自己创造的。

沃伦·巴菲特：我们没有创造它们，不。我们消费它们，但不创造它们。（笑声）但是，你知道，不是很多年前，你还记得理查德·布兰森，他来到这个国家，推出了一种叫做维珍可乐的东西。你知道，有人说品牌是一种承诺。嗯，我不确定他通过那个特定的品牌想传达什么承诺——（笑声）——但你知道，从那以后你就再没听说过任何关于它的事了。我不知道历史上出现过多少种可乐饮料。唐·基奥可能知道，但我肯定有几百种。这些是真正的壁垒，但很难做到。我的意思是，人们——正如辉瑞在立普妥上发现的那样，时间到了，一个曾经绝对的金矿仍然是一个不错的矿，但远非昔比。但我们有一些业务拥有——嗯，没人会再建一条铁路，你知道。

我们有竞争对手，并且在替代运输方式等方面也会有竞争对手。但如果你以远低于重置成本的价格购买一些基本必需的活动，你当然就拥有了对新竞争者的壁垒。当然，联合太平洋公司每天都在为每一笔生意而战。查理？

查理·芒格：是的。我们在漫长的一生中发现，一个竞争对手往往就足以毁掉一个企业。

沃伦·巴菲特：嗯，我确实发现了这一点。我最初在奥马哈30街和雷迪克街交叉口开了一个加油站，旁边有一个菲利普斯加油站。我的是辛克莱加油站。你知道，他收多少汽油费，我的价格就是多少。（笑声）我没什么选择。你不喜欢做那样的生意。

29. 芒格谈比亚迪和中国电动汽车

沃伦·巴菲特：5号。

听众：嗨。我是来自密苏里州堪萨斯城的凯尔·米勒（音），我想知道比亚迪电动汽车公司的情况，以及随着新车在美国上市，这是否有望增加公司的价值。

沃伦·巴菲特：查理是我们对比亚迪的专家，他现在来回答。（笑声）

查理·芒格：嗯，中国的汽车市场是一个巨大的市场，而它们恰好位于中国。所以这是比亚迪的主要关注点。我认为他们首先会尝试在这里销售的车辆将是给加州车队的，那里我们有环境问题等等，电动轿车可能有一个市场。当然，还有各种补贴给使用电动轿车的人。我有一些亲戚通勤到华盛顿特区，他们只有买了普锐斯才能使用高速公路的快车道，这对丰田非常有利。我们会看到更多类似的情况。总的来说，我认为比亚迪是一家有趣的公司，如果你仔细想想。这是一个农民家庭的八个孩子之一，后来成为著名的工程学院教授，在他不到50岁之前，就赢得了相当于中国诺贝尔奖的奖项。他创建了一家公司，拥有超过18万名员工，土地面积大约相当于澳门，以及超过一亿平方英尺的建筑。

这是一家非常有趣的初创公司。

沃伦·巴菲特：你认为到2030年，电动汽车占汽车的比例会是多少？

查理·芒格：不会很多。（笑声）

沃伦·巴菲特：我不该问的。

查理·芒格：我认为社会——就像爱荷华州正在补贴的风力发电一样。我们应该以各种方式补贴电动汽车，就像华盛顿特区那样，让它们使用高速公路的快车道，以便促进技术发展，使我们能更快地摆脱对石油的依赖。所以我认为会有更多的补贴，也会有更多的电动汽车，但我不期待一场突如其来的革命。我驾驶了最新版的比亚迪电动汽车。我周二坐着它兜了一圈，我对那辆车的改进程度感到惊讶。中国人学习我们需要很长时间才能学会的东西的速度简直令人惊讶。世界正变得更具竞争力。

30. 伯克希尔的保险浮存金和低利率

沃伦·巴菲特：好的。6区。

听众：下午好，沃伦和查理。我是来自印度孟买、现居德克萨斯州奥斯汀的杰伊（听不清）。我要再次感谢你们带来精彩的节目，在我来这里参加的这几年里，我真的很享受听你们两位讲话，尤其是你们综合和阐明许多问题的能力，无论是关于估值、人生哲学等重要问题，还是有时甚至是琐碎的事情，沃伦，比如两年前你澄清了在查理·罗斯节目上关于索菲亚·罗兰的笑话。所有这些都极其有益。我的问题是关于保险业务的一些澄清，特别是你们如何评估它。通常，我们掌握了大量浮存金信息以及承保利润或亏损信息。所以，我们被引导思考的一种方式是你们获得的投资价值——来自未来预期浮存金的投资现值。然而，我认为去年，你们还谈到了经济商誉，尤其是在GEICO，我记得你们用了某个比率，相当于当年保险保费的90%。

所以我想知道你们能否稍微谈谈看待不同保险业务估值的不同方式。那将非常有帮助。谢谢。

沃伦·巴菲特：嗯，经济价值来自于如果以优惠利率获得浮存金，则能够利用该浮存金。现在，如果利率是7%或8%，即使你获取浮存金的成本是2%，它仍然非常有价值。但在经济上——以GEICO为例，我认为期望在未来可预见的时期内，平均而言，有相当可观的承保利润和增长是相当合理的。然后再加上不断增长的浮存金，因为浮存金随着保费规模的增长而增长。嗯，那是最——你知道，那是非常有吸引力的组合因素，因为GEICO是低成本生产商。它在规模、整个运营方式方面有一些真正的优势，使得其他公司很难复制他们的成本结构。在任何行业，拥有一个低成本生产商总是好的，但在保险行业则非常非常好。现在，阿吉特的业务则完全不同。

我的意思是，在GEICO，我们拥有——我们有超过1000万份保单，这是一种统计型业务。所以我们在纽约有数十万名司机，我们按年龄、职业和各种因素对他们进行分类。所以这是一种非常统计化的业务，再加上低成本，随着时间的推移，非常非常有可能产生良好的结果。在阿吉特的业务中，他必须在每笔交易上都保持聪明，因为当有人想在接下来一年为日本超过100亿美元的损失事件购买保险时，这不是——你不能在任何书上查到，你也不能做足够多的相同交易来知道你在那个特定交易上的计算是否正确。现在，如果你在这类交易上做了100次计算，你很快就会知道做这些计算的人是否合适。但阿吉特业务的经济商誉更多地基于为单笔交易定价的技能以及甚至找到需要这些交易的人的能力。

而在GEICO，它基本上基于一个机器。但这个机器如何运行至关重要，托尼·奈斯利在管理方面绝对做得非常出色。在他接管之前的几年里，它——你知道，它一直徘徊在2%的市场份额，几乎没有取得任何进展。而托尼几乎将我们的市场份额提高了五倍，同时取得了出色的承保业绩。所以他把一台具有巨大潜力的机器——然后他超出了我认为它所拥有的潜力。所以估值有不同的方式。最终都归结为拥有大量浮存金和极低成本的浮存金，就我们而言，浮存金成本是负的，所以人们实际上是在付钱让我们持有他们700亿美元的资金，这非常有趣。（笑声）我认为这种情况持续的可能性真的相当高，尽管我不认为700亿快速增长的可能性很高。

我认为我们能保住这700亿就很幸运了。但我认为我们能够以低于零的成本获得它的可能性很大，我认为即使利率上升到4%、5%、6%或7%，这也将是事实。我认为我们很可能能够做到这一点，在这种情况下，这是一笔巨大的资产。查理？

查理·芒格：是的。我们目前处于常规投资浮存金的低回报环境中，但这不会永远持续。过去有些时候，阿吉特会创造大量独一无二的浮存金，沃伦会在我们不得不归还之前用它赚取20%或30%的回报。那非常有趣，我们一次又一次地这样做。未来是否还会再有这种规模的机会，我不知道，但也不一定需要。

沃伦·巴菲特：你知道，当我们有30——目前我们的现金头寸——嗯，实际上如果算上所有公司，可能是360亿或370亿美元——我们基本上没有任何收益。所以如果——我们今天的盈利能力正受到当前美联储政策的影响。而且我——你知道，这在长期内不会是正常利率。所以在这个意义上，我们的正常盈利能力被伯南克先生压制了，但可能出于非常好的理由。

31. 芒格：能源独立是“愚蠢的想法”

沃伦·巴菲特：7号？

听众：奥拉·拉尔森（音），盐湖城。五六年前，您在年度股东报告中写道，经常账户赤字、贸易逆差不可能无限持续下去。当然，其中很大一部分是原油进口。现在，能源市场上有些人正在谈论美国在能源市场上的独立。您能否谈谈这如何可能影响贸易逆差？谢谢。

沃伦·巴菲特：是的。如果我们的能源总产量大幅增加，并且我们需要进口的东西成本更低，那显然是一个巨大的利好。我的意思是，这是经常账户赤字中的一个重要因素。我们在石油方面做了很多。我不认为我们能在石油上实现自给自足，但天然气是巨大的。我们的情况在过去三年中在能源方面发生了很大变化。查理和我可能会争论，随着时间的推移，长期使用别人的能源而保留我们自己的仍然更好。

查理·芒格：这是我的观点。

沃伦·巴菲特：是的。很长一段时间——在我的一生中，我们是石油出口国，一个重要的石油出口国。如果我们当时用沙特的——

查理·芒格：那会更好。

沃伦·巴菲特：是的。（笑声）有查理在这里，你蒙混不过去。那会更好。好的。如果我们当时使用沙特阿拉伯的石油，实际上，把我们像东德克萨斯等地拥有的所有巨大储量当作一个战略性石油储备，留待下一个世纪使用，那会更好，但是——

查理·芒格：那会好得多。

沃伦·巴菲特：是的，确实如此。但我们的情况已经好转，这意味着我们的经常账户赤字情况也有所改善。我们还有一段路要走，但确实比三四年前看起来要好。你不这么认为吗，查理？

查理·芒格：嗯，我认为——那些——这是一种非常复杂的相互作用。我的观点是，美国最宝贵的资源是其碳氢化合物储量，就是这里那些，当然，我想用掉——我是个清教徒。我总是希望现在受苦，以便让未来更好，因为我认为这是成年人应该做的。所以我完全支持——（掌声）——用掉别人的石油，保存我们自己的。你知道，我认为能源独立的想法是我听过的成年人谈论的最愚蠢的想法之一。想想看，如果我们更早实现了完全的能源独立，我们的处境会有多糟糕。我们就一点石油和天然气都没有了。那难道不是一个美妙的状态？我们不想要能源独立。我们要保存这些东西。感谢上帝，其他人有一些他们愿意出售的这种宝贵东西。

在这个问题上，我持有与大多数人完全相反的观点，当然，我认为我是对的。（笑声）